We investigated the carbon dynamics and budget in a grassland of Miscanthus sinensis, which is widely distributed in Japan, over a 2-year period (2000–2001). Plant biomass began to increase from May and peaked in September, then decreased towards the end of the growing season (October). Soil respiration rates also exhibited seasonal fluctuations that reflected seasonal changes in soil temperature and root respiration. The contribution of root respiration to total soil respiration was 22–41% in spring and summer, but increased to 52–53% in September. To determine the net ecosystem production (carbon budget), we estimated annual net primary production, soil respiration, and root respiration. Net primary production was 1207 and 1140 g C m−2 in 2000 and 2001, respectively. Annual soil respiration was 1387 g C m−2 in 2000 and 1408 g C m−2 in 2001; root respiration was 649 and 695 g C m−2 in 2000 and 2001, respectively. Moreover, some of the carbon fixed as net production (457–459 g C m−2) is removed by mowing in autumn in this grassland. Therefore, the annual carbon budget was estimated to be −56 g C m−2 in 2000 and − 100 g C m−2 in 2001. These results suggest that the Miscanthus sinensis grassland in Japan can act as a source of CO2.