During the Last Glacial Maximum (LGM), atmospheric CO2 concentration was 80–100 ppmv lower than in pre-industrial times. At that time steppe-tundra was the most extensive biome on Earth. Some authors assume that C storage in that biome was very small, similar to today's deserts, and that the terrestrial carbon (C) reservoir increased at the Pleistocene-Holocene transition (PHT) by 400–1300 Gt. To estimate C storage in the entire steppe-tundra biome we used data of C storage in soils of this biome that persisted in permafrost of Siberia and Alaska and developed a model that describes C accumulation in soils and in permafrost. The model shows a slow but consistent C increase in soil when permafrost appears. At the PHT, C-rich frozen loess of Europe and South of Siberia thawed and lost most of its carbon. Soil carbon decreases as tundra-steppe changes to forest, steppes and tundra. As a result, over 1000 Gt C was released to the atmosphere, oceans, and other terrestrial ecosystems. The model results also show that restoring the tundra-steppe ecosystem would enhance soil C storage, while providing other important ecosystem services.