Any change in the ability of northern peatlands to act as a sink for atmospheric CO2 will play a crucial part in the response of the Earth system to global warming. We argue that a true assessment of the sink-source relationships of peatland ecosystems requires that losses of C in drainage waters be included when determining annual net C uptake, thus connecting measurements of stream C fluxes with those made at the land surface-atmosphere interface. This was done by combining estimates of net ecosystem exchange (NEE) with stream water measurements of TOC, DIC, and gaseous C loss, in a 335-ha lowland temperate peatland catchment (55°48.80′N, 03°14.40′W) in central Scotland over a 2-year period (1996–1998). Mean annual downstream C flux was 304 (±62) kg C ha−1 yr−1, of which total organic carbon (TOC) contributed 93%, the remainder being dissolved inorganic carbon (DIC) and free CO2. At the catchment outlet evasion loss of CO2 from the stream surface was estimated to be an additional 46 kg C ha−1 yr−1. Over the study period, NEE of CO2-C resulted in a flux from the atmosphere to the land surface of 278 (±25) kg C ha−1 yr−1. Net C loss in drainage water, including both the downstream flux and CO2 evasion from the stream surface to the atmosphere, was therefore greater or equal to the net annual C uptake as a result of photosynthesis/respiration at the land surface. By combining these and other flux terms, the overall C mass balance suggests that this system was either acting as a terrestrial C source or was C neutral.