Forest ecosystems are increasingly expected to produce multiple goods and services, such as timber, biodiversity, water flows, and sequestered carbon. While many of these are not mutually exclusive, they cannot all be simultaneously maximised so that management compromise is inevitable. We used a 42-year dataset from a naturally regenerating floodplain forest of the river red gum (Eucalyptus camaldulensis) to investigate the effects of pre-commercial thinning on long-term patterns in habitat quality, forest structure and rates of carbon storage (i.e. standing aboveground carbon). Estimates of habitat quality were based on the density of hollow-bearing trees because hollows are ecologically important to many species of vertebrates and invertebrates in these forests. Thinning improved habitat value by producing 20 (±8) hollow-bearing trees per ha after 42 years, while the unthinned treatment produced none. Unthinned (highest density) stands were dominated by many slender trees, mostly <25 cm in diameter, whereas thinned stands produced negatively skewed size distributions with higher median and maximum stem diameters. Moderately thinned stands (560 trees ha−1) had the highest aboveground carbon storage rate (4.1 t C year−1) and the highest aboveground carbon stocks (200.2 ± 9.6 t C ha−1) after 42 years, while the unthinned treatment had the lowest carbon storage rate (1.6 t C year−1) and an intermediate level of aboveground standing carbon (165.1 ± 31.1 t C ha−1). Our results highlight the importance of early stand density as a determinant of long-term forest structure, habitat quality and carbon storage rates. We recommend that thinning be considered as one component of a broader strategy for enhancing the structure, habitat value and aboveground carbon storage of developing floodplain forests.