Mongolian boreal forest merits special attention since it is located in the transitional area between the southern Siberian boreal forest and the Asian steppe zone, a vulnerable region being potentially affected by global warming and anthropogenic activities. This paper presents the first full-year-long continuous measurements of net ecosystem CO2 flux (NEE) made over a montane larch (Larix sibirica Ledeb.) forest in Mongolia from 25 March 2003 to 24 March 2004 (366 days) using the eddy covariance technique. The hourly maximum uptake was −10.1 μmol m−2 s−1. The maximum daily uptake of −4.0 g C m−2 d−1 (negative NEE values denote net carbon uptake by the canopy from the atmosphere) occurred in July. The annual cumulative NEE was −85 g C m−2, indicating that the forest acted as a net sink of CO2. We examined the responses of NEE to environmental conditions in the growing season from May to September. Both daytime 30-min mean and daily integrated NEE responded to incident photosynthetically active radiation (PAR) in a rectangular hyperbolic fashion. Model results show that the apparent quantum yield (α) was −0.0133 ± 0.0011 μmol CO2 per μmol of photons, and the bulk light use efficiency (LUE) on the daily basis was −6.7 mmol CO2 per mole of PAR photons over the entire growing season for this forest. Additionally, daily integrated NEE was also a linear function of the normalized difference vegetation index (NDVI), a linear function of mean daily air temperature (Ta), and a quadratic polynomial function of daily means of the atmospheric water vapor pressure deficit (VPD). Among these factors, LAI (as measured by NDVI) was dominant in affecting the dynamics of NEE, followed by Ta. Lower Ta was limiting the growth rate of this montane larch forest. As daily means of VPD exceeded 1.2 kPa, net CO2 uptake by the canopy declined. Nevertheless, water stress was not observed as a problem for the forest growth.