The ecosys model was applied to investigate the effects of water table and subsurface hydrology changes on carbon dioxide exchange at the ombrotrophic Mer Bleue peatland, Ontario, Canada. It was hypothesized that (1) water table drawdown would not affect vascular canopy water potential, hence vascular productivity, because roots would penetrate deeper to compensate for near-surface dryness, (2) moss canopy water potential and productivity would be severely reduced because rhizoids occupy the uppermost peat that is subject to desiccation with water table decline, and (3) given that in a previous study of Mer Bleue, ecosystem respiration showed little sensitivity to water table drawdown, gross primary productivity would mainly determine the net ecosystem productivity through these vegetation–subsurface hydrology linkages. Model output was compared with literature reports and hourly eddy-covariance measurements during 2000–2004. Our findings suggest that late-summer water table drawdown in 2001 had only a minor impact on vascular canopy water potential but greatly impacted hummock moss water potential, where midday values declined to −250 MPa on average in the model. As a result, simulated moss productivity was reduced by half, which largely explained a reduction of 2–3 μmol CO2 m−2 s−1 in midday simulated and measurement-derived gross primary productivity and an equivalent reduction in simulated and measured net ecosystem productivity. The water content of the near-surface peat (top 5–10 cm) was found to be the most important driver of interannual variability of annual net ecosystem productivity through its effects on hummock moss productivity and on ecosystem respiration.