The aim of present study was to estimate the annual carbon balance of a young Larix sibirica plantation on former heathland pasture in Iceland. The data covered 1 yr of measurements, year 2005. The daily NEE varied from about +7.7 to −22.5 g CO2 m−2 d−1 in October and July, respectively, resulting in annual sequestration of –727 g CO2 m−2 a−1. This annual carbon balance falls within the observed range of published annual NEEs for other plantation forests. Daily net uptake started in middle of April, when thawing of the soil surface began and it increased as the spring progressed. During a cold spell in the middle of May, the air temperature dropped below zero for some days, resulting in a decline of carbon uptake and a slow recovery of the ecosystem. Such freezing incidents are expected to become more frequent at northern latitudes in warmer future climate and their impact should, therefore, be studied further. Moreover, longer time series of measurements on NEE are needed to reveal the effect of weather conditions on long-term carbon balance. Corrections for small errors in winter and night fluxes from open-path gas analysers also need to be developed.