The Arctic has experienced rapid warming and, although there are uncertainties, increases in precipitation are projected to accompany future warming. Climate changes are expected to affect magnitudes of gross ecosystem photosynthesis (GEP), ecosystem respiration (ER) and the net ecosystem exchange of CO2 (NEE). Furthermore, ecosystem responses to climate change are likely to be characterized by nonlinearities, thresholds and interactions among system components and the driving variables. These complex interactions increase the difficulty of predicting responses to climate change and necessitate the use of manipulative experiments. In 2003, we established a long-term, multi-level and multi-factor climate change experiment in a polar semidesert in northwest Greenland. Two levels of heating (30 and 60 W m−2) were applied and the higher level was combined with supplemental summer rain. We made plot-level measurements of CO2 exchange, plant community composition, foliar nitrogen concentrations, leaf δ13C and NDVI to examine responses to our treatments at ecosystem- and leaf-levels. We confronted simple models of GEP and ER with our data to test hypotheses regarding key drivers of CO2 exchange and to estimate growing season CO2-C budgets. Low-level warming increased the magnitude of the ecosystem C sink. Meanwhile, high-level warming made the ecosystem a source of C to the atmosphere. When high-level warming was combined with increased summer rain, the ecosystem became a C sink of magnitude similar to that observed under low-level warming. Competition among our ER models revealed the importance of soil moisture as a driving variable, likely through its effects on microbial activity and nutrient cycling. Measurements of community composition and proxies for leaf-level physiology suggest GEP responses largely reflect changes in leaf area of Salix arctica, rather than changes in leaf-level physiology. Our findings indicate that the sign and magnitude of the future High Arctic C budget may depend upon changes in summer rain.