Carbon dioxide and methane fluxes in a palsa mire characterized by dry (palsa) and wet surfaces in a subarctic zone in Finland were measured using a static chamber technique during two climatically different years, 1998 and 1999. Each of the 24 collars was individually studied for water table level, peat temperature, pH, vegetation, frost depth, CO2 exchange and CH4 fluxes. The annual gaseous carbon balance varied from −36.9 g C m−2 to −138.6 g C m−2 (uptake) on wet surfaces. During both years, palsa surfaces with shrub vegetation were sinks for carbon, whereas palsa surfaces with sparse vegetation lost carbon to the atmosphere. In 1999, a wet year, a lower NEE resulted mainly from a decrease in photosynthesis. The annual emissions of CH4 ranged from 1.0 g CH4-C m−2 in the palsa to 24.7 g CH4-C m−2 at the palsa margin. On wet surfaces, photosynthesis, respiration and CH4 fluxes were tightly linked. Annual NEE and CH4 fluxes were close to the values reported for boreal peatlands (fens).