Through a simple modeling exercise, three mechanisms have been identified, each operating at a different timescale, that may govern carbon dynamics in Arctic tundra regions and partially explain observed CO2 flux variability. At short timescales the biosphere reacts to meteorological forcing. Drier conditions are associated with aerobic soil decomposition, a large CO2 efflux, and a net ecosystem loss of carbon. Cooler and moister conditions favor slower anaerobic decomposition in soils, good growing conditions, and terrestrial carbon sequestration. At intermediate timescales, periods of terrestrial carbon loss are directly linked to periods of carbon sequestration by the ability of the ecosystem to retain labile nitrogen. Labile nitrogen released to the soil during periods when the tundra is a source of carbon (soil respiration>net primary productivity) is retained within the ecosystem and accessed during periods when carbon sequestration is favored (net primary productivity>soil respiration). Finally, the ability of vegetation to respond to long-term changes in soil nutrient status via changes in leaf nitrogen and leaf area index modulates this dynamic at intermediate to long timescales.