Sapflow measurements were carried out in a larch forest in eastern Siberia, an area of wide permafrost distribution. Canopy transpiration and canopy conductance were scaled up from these values. The objective was to analyze the relationship between environmental variables, mainly vapour pressure deficit (D), soil moisture and soil thawing rate with canopy transpiration and canopy conductance. Maximum sapflow rate was 42.4 kg d−1 tree−1 with bigger trees showing a more accentuated response to environmental changes. Canopy transpiration (Ec) showed inter-annual variability, with a maximum value of 1.7 mm d−1 in 2003 and 1.2 mm d−1 in 2004. Soil moisture was higher in 2003 because of higher precipitation (230 mm in 2003 compared to 110 mm in 2004 for the total growing season). Maximum soil thawing rate in 2003 and 2004 was 140 cm and 120 cm, respectively, because of different air temperature, soil water content and precipitation regime among other factors. Canopy conductance (gc) was positively correlated with D during fine weather and well-watered days in both years. On the other hand, canopy conductance was well correlated with soil moisture (R2 = 0.83) in the upper layers (20–30 cm depth) during 2003 (wet year) but not in 2004 (dry year), representing its strong but limited control over water fluxes from the forest. By comparison with other studies in this region, canopy transpiration is estimated to contribute to almost 50% of the total forest evaporation, highlighting the important role of understorey transpiration in permafrost regions. Our results show that it is not only the impermeability of permafrost with the property of keeping soil moisture in the thin active layer but it is also the slow soil thawing rate that plays the important role of controlling the amount of water available for trees roots in the upper soil layers during dry years.