In this study we provide a quantification of the main patterns of change of a subarctic peatland caused by permafrost decay monitored between 1957 and 2003. Up-thrusting of the peatland surface due to permafrost aggradation during the Little Ice Age resulted in the formation of an extensive peat plateau that gradually fragmented into residual palsas from the 19th century to the present. Only about 18% of the original surface occupied by permafrost was thawed in 1957, whereas only 13% was still surviving in 2003. Rapid permafrost melting over the last 50 years caused the concurrent formation of thermokarst ponds and fen-bog vegetation with rapid peat accumulation through natural successional processes of terrestrialization. The main climatic driver for accelerated permafrost thawing was snow precipitation which increased from 1957 to present while annual and seasonal temperatures remained relatively stable until about the mid-1990s when annual temperature rose well above the mean. Contrary to current expectations, the melting of permafrost caused by recent climate change does not transform the peatland to a carbon-source ecosystem as rapid terrestrialization exacerbates carbon-sink conditions and tends to balance the local carbon budget.