Drier conditions caused by drainage for infrastructure development, or associated with global climate warming, may test the resilience of carbon-rich northern peatlands. Feedbacks among biological and hydrological processes maintain the long-term stability of peatlands, but if hydrological thresholds are passed, these feedbacks may be weakened, causing a shift in ecosystem state and potentially large losses of carbon (C). To determine peatland response to hydrological change, we examined the structure (vegetation composition and hydrology) and biogeochemical function (carbon dioxide exchange) of a pristine bog and a bog subject to ~7 years localised drainage (caused by regional groundwater drawdown due to mine dewatering) in the Hudson Bay Lowland, Canada. Water tables at the drained bog were ~1 m below the hummock surface at the time of study compared to ~0.3 m at the pristine bog. For hummocks and intermediate microforms at the drained bog, plant production was significantly less than at the pristine bog, most likely due to small changes in vegetation structure (reduced Sphagnum cover and smaller shrub leaf:stem ratios) caused by deeper water tables and significantly reduced moisture content of surface peat. Despite these changes in vegetation and hydrology, net ecosystem production (NEP) remained positive (C sink) for these microforms at the drained bog. Dry pools with mostly bare peat at the drained bog had negative NEP (C source to atmosphere), in stark contrast to Sphagnum- and sedge-dominated pools at the pristine bog with small but positive NEP. Our study shows that dry pools now occupy an unstable state, but the hydrological thresholds for a shift in ecosystem state have not yet been reached for hummocks and intermediate microforms at the drained bog. However, weak or no relationships between water table depth, peat surface moisture content, and plant production for these microforms at the drained bog, suggest that drainage has weakened the hydrological feedbacks regulating peat production, causing peat accumulation to slow. If drier conditions prevail, this reduced resilience increases the potential for a shift in ecosystem state and raises the risk of large C loss due to continued decomposition of deeper peat in oxic conditions, and wildfire.