As high latitudes warm, a portion of the large organic carbon pool stored in permafrost will become available for transport to aquatic ecosystems as dissolved organic carbon (DOC). If permafrost DOC is biodegradable, much will be mineralized to the atmosphere in freshwater systems before reaching the ocean, accelerating carbon transfer from permafrost to the atmosphere, whereas if recalcitrant, it will reach marine ecosystems where it may persist over long time periods. We measured biodegradable DOC (BDOC) in water flowing from collapsing permafrost (thermokarst) on the North Slope of Alaska and tested the role of DOC chemical composition and nutrient concentration in determining biodegradability. DOC from collapsing permafrost was some of the most biodegradable reported in natural systems. However, elevated BDOC only persisted during active permafrost degradation, with a return to pre-disturbance levels once thermokarst features stabilized. Biodegradability was correlated with background nutrient concentration, but nutrient addition did not increase overall BDOC, suggesting that chemical composition may be a more important control on DOC processing. Despite its high biodegradability, permafrost DOC showed evidence of substantial previous microbial processing and we present four hypotheses explaining this incongruity. Because thermokarst features form preferentially on river banks and lake shores and can remain active for decades, thermokarst may be the dominant short-term mechanism delivering sediment, nutrients, and biodegradable organic matter to aquatic systems as the Arctic warms.