Tropical peatlands cover over 25 Mha in Southeast Asia and are estimated to contain around 70 Gt of carbon. Peat swamp forest ecosystems are an important part of the region's natural resources supporting unique flora and fauna endemic to Southeast Asia. Over recent years, industrial plantation development on peatland, especially for oil palm cultivation, has created intense debate due to its potentially adverse social and environmental effects. The lack of objective up-to-date information on the extent of industrial plantations has complicated quantification of their regional and global environmental consequences, both in terms of loss of forest and biodiversity as well as increases in carbon emissions. Based on visual interpretation of high-resolution (30 m) satellite images, we find that industrial plantations covered over 3.1 Mha (20%) of the peatlands of Peninsular Malaysia, Sumatra and Borneo in 2010, surpassing the area of Belgium and causing an annual carbon emission from peat decomposition of 230–310 Mt CO2e. The majority (62%) of the plantations were located on the island of Sumatra, and over two-thirds (69%) of all industrial plantations were developed for oil palm cultivation, with the remainder mostly being Acacia plantations for paper pulp production. Historical analysis shows strong acceleration of plantation development in recent years: 70% of all industrial plantations have been established since 2000 and only 4% of the current plantation area existed in 1990. ‘Business-as-usual’ projections of future conversion rates, based on historical rates over the past two decades, indicate that 6–9 Mha of peatland in insular Southeast Asia may be converted to plantations by the year 2020, unless land use planning policies or markets for products change. This would increase the annual carbon emission to somewhere between 380 and 920 Mt CO2e by 2020 depending on water management practices and the extent of plantations.