Net ecosystem CO2 exchange (NEE) was measured from June 2000 through October 2001 by 10 automatic chambers at a peatland in southeastern New Hampshire. The high temporal frequency of this sampling method permitted detailed examination of NEE as it varied daily and seasonally. Summer of 2001 was significantly drier than the 30-year average, while summer of 2000 was wetter than normal. Although NEE varied spatially across the peatland with differences in plant species composition and biomass, maximum CO2 uptake was 30--40% larger in the drier summer in evergreen and deciduous shrub communities but the same or lower in sedge sites. Ecosystem respiration rates were 13--84% larger in the drier summer depending on plant growth form with water table and temperature as strong predictors. Ecosystem respiration was also correlated with maximum ecosystem productivity and foliar biomass suggesting that plant processes, water table, and temperature are tightly linked in their control of respiratory losses. The ratio between maximum productivity and respiration declined for evergreen shrub and sedge sites between the wet and dry summer, but increased in deciduous shrub sites. A drier climate may reduce the CO2 sink function of peatlands for some growth forms and increase it for others, suggesting that ecosystem carbon and climate models should account for differences in growth form responses to climate change. It also implies that plant functional types respond on short timescales to changes in moisture, and that the transition from sedges to shrubs could occur rapidly in peatlands under a drier and warmer climate.