We measured soil climate and the turbulent fluxes of CO2, H2O, heat, and momentum on short towers (2 m) in a 160-yr-old boreal black spruce forest in Manitoba, Canada. Two distinct land cover types were studied: a Sphagnum-dominated wetland, and a feathermoss (Pleurozium and Hylocomium)-dominated upland, both lying within the footprint of a 30-m tower, which has measured whole-forest carbon exchange since 1994. Peak summertime uptake of CO2, was higher in the wetland than for the forest as a whole due to the influence of deciduous shrubs. Soil respiration rates in the wetland were approximately three times larger than in upland soils, and 30% greater than the mean of the whole forest, reflecting decomposition of soil organic matter. Soil respiration rates in the wetland were regulated by soil temperature, which was in turn influenced by water table depth through effects on soil heat capacity and conductivity. Warmer soil temperatures and deeper water tables favored increased heterotrophic respiration. Wetland drainage was limited by frost during the first half of the growing season, leading to high, perched water tables, cool soil temperatures, and much lower respiration rates than observed later in the growing season. Whole-forest evapotranspiration increased as water tables dropped, suggesting that photosynthesis in this forest was rarely subject to water stress. Our data indicate positive feedback between soil temperature, seasonal thawing, heterotrophic respiration, and evapotranspiration. As a result, climate warming could cause covariant changes in soil temperature and water table depths that may stimulate photosynthesis and strongly promote efflux of CO2 from peat soils in boreal wetlands.