The hydrology of Quebec, Canada, boreal fens is poorly documented. Many peatlands are located in watersheds with impounded rivers. In such cases, their presence influences reservoir inflows. In recent years, some fens have been subjected to an increase of their wet area, a sign that they may be evolving towards an aquatic ecosystem. This dynamic process is called aqualysis. This article presents the seasonal and monthly hydrological budgets of a small watershed including a highly aqualysed fen (James Bay region). The monitoring of precipitation (P), runoff (Q) and groundwater levels (WL) was conducted during the ice-free season. Three semiempirical equations (Thornthwaite, Priestley–Taylor and Penman–Monteith) were used and compared to calculate potential evapotranspiration. The first two equations, having fewer parameters, estimate higher potential evapotranspiration values than the third equation. The use of pressure-level gauges installed in wells, for the calculation of peatland water storage, is inconclusive. Swelling of peat, peat decomposition and plant composition could be responsible for nonnegligible amounts of absorbed water, which are not entirely accounted for by well levels. The estimation of peat matrix water storage is potentially the largest source of error and the limiting factor to calculate water balances in this environment. The results show that the groundwater level and the water storage vary depending on the season and especially after a heavy rainfall. Finally, the results illustrate the complexity of water routing through the site and thus raise several questions to be resolved in the future. Copyright © 2012 John Wiley & Sons, Ltd.