The carbon dynamics of northern natural ecosystems contribute significantly to the global carbon balance. Periodic disturbances to these dynamics include insect herbivory. Larvae of autumn and winter moths (Epirrita autumnata and Operophtera brumata) defoliate mountain birch (Betula pubescens) forests in northern Scandinavia cyclically every 9–10 years and occasionally (50–150 years) extreme population densities can threaten ecosystem stability. Here we report impacts on C balance following a 2004 outbreak where a widespread area of Lake Torneträsk catchment was severely defoliated. We show that in the growing season of 2004 the forest was a much smaller net sink of C than in a reference year, most likely due to lower gross photosynthesis. Ecosystem respiration in 2004 was smaller and less sensitive to air temperature at nighttime relative to 2006. The difference in growing season uptake between an insect affected and non-affected year over the 316 km2 area is in the order of 29 × 103 tonnes C equal to a reduction of the sink strength by 89%.