ABSTRACTDrought events are increasing in frequency and intensity due to climate change, causing lasting impacts on plant communities and ecosystem functioning. In the sub‐arctic, climate is changing at a rate above the global average with amplifying effects on the carbon cycle. Drought‐induced shifts in the balance between productivity and respiration might have important implications for climate change feedbacks in these regions. However, little is known about how carbon fluxes in sub‐arctic ecosystems respond to drought, hampering predictions. Here, we test how two important but contrasting sub‐arctic ecosystem types, Sphagnum peatland and tundra heath, respond to experimental drought. Mesocosms were exposed to a full precipitation exclusion for 7 weeks, decreasing gravimetric water content by 66% and 53% for Sphagnum peatland and tundra heath, respectively. Drought suppressed all CO2 flux components. Gross primary productivity was on average reduced by 47% and 64%, and ecosystem respiration by 40% and 53% in Sphagnum peatland and tundra heath, respectively. Concomitantly with the ecosystem fluxes, leaf photosynthesis of the three most abundant vascular plant species per ecosystem type was on average suppressed by 40% (peatland) and 77% (tundra heath). Drought resulted in high plant mortality, with up to 54% (peatland) and 73% (tundra heath) dead shoots, which might represent a significant legacy effect suppressing CO2 uptake in subsequent growing seasons. In summary, tundra heath was overall more responsive to drought than peatland. This differential sensitivity, previously unaccounted for, might be important in the future under intensifying drought events. Considering that tundra heath covers more than half of the sub‐arctic land area, its drought responsiveness might induce significant reductions in total arctic net CO2 uptake. This would move the arctic carbon balance further toward a net CO2 source.