Atmospheric gradient techniques were used to measure the net ecosystem exchange of CO2 for a subarctic sedge fen near Churchill, Manitoba, during the summer of 1994. This was the second driest and warmest summer since 1943. The mean daily temperature was 2°C above average, and the rainfall was 55% below normal. More than half of the rain fell after the main growth period. The fen landscape comprises hummocks and hollows. Equilibrium retention storage occurs at an average standing water depth of 80 mm above the hollow bottoms (water table reference is 0). During the summer of 1994 the average water table position at -117 mm resided well below the zero equilibrium retention depth. Periodically this decreased to -265 mm, well below a 30-year average depth of -70 mm. During the full summer period, measurements indicate that the fen was a source of CO2. Only during a relatively short period of most active photosynthesis in midseason was there a small net CO2 uptake. A deep and warm soil aerobic layer promoted a large respiration flux, and this exceeded the photosynthetic CO2 uptake of the stressed sedge community. Diurnally, changes in surface temperature and incident solar radiation can explain most of the changes in the net CO2 exchange. It is hypothesized that in 1994 photosynthesis was significantly decreased and the respiration loss enhanced by the hot, dry conditions. If this hypothesis is correct, by analogy climate warming would need to be accompanied by a substantial rainfall increase to maintain a condition of net CO2 gain to this peatland.