Peatlands cover about 21% of the landscape and contain about 80% of the soil carbon stock in western Canada. However, the current rates of carbon accumulation and the environmental controls on ecosystem photosynthesis and respiration in peatland ecosystems are poorly understood. As part of Fluxnet-Canada, we continuously measured net ecosystem carbon dioxide exchange (NEE) using the eddy covariance technique in a treed fen dominated by stunted Picea mariana and Larix laricina trees during August 2003–December 2004. The total carbon stock in the ecosystem was approximately 51,000 g C m−2, with only 540 g C m−2 contributed by live above ground vegetation. The NEE measurements were used to parameterize simple physiological models to assess temporal variation in maximum ecosystem photosynthesis (Amax) and ecosystem respiration rate at 10 °C (R10). During mid-summer the ecosystem had a relatively high Amax (approx. 30 μmol m−2 s−1) with relatively low R10 (approx. 4 μmol m−2 s−1). The peak mid-day NEE uptake rate during July and August was 10 μmol m−2 s−1. The ecosystem showed large seasonal variation in photosynthetic and respiratory activity that was correlated with shifts in temperature, with both spring increases and fall decreases in Amax well predicted by the mean daily air temperature averaged over the preceding 21 days. Leaf-level gas exchange and spectral reflectance measurements also suggested that seasonal changes in photosynthetic activity were primarily controlled by shifts in temperature. Ecosystem respiration was strongly correlated with changes in ecosystem photosynthesis during the growing season, suggesting important links between plant activity and mycorrhizae and microbial activity in the shallow layers of the peat. Only very low rates of respiration were observed during the winter months. During 2004, the peatland recorded a net annual gain of 144 g C m−2 year−1, the result of a difference between gross photosynthesis of 713 and total ecosystem respiration of 569 g C m−2 year−1.