Peatlands around the world have been drained for agriculture and forestry practices over the last century, leading to carbon loss, water loss, and soil degradation. Soil available water capacity (AWC, the amount of water a soil can provide for plants) is one of the most important soil properties regulating the water balance and plays a pivotal role in plant growth. Compared to most mineral soils, our understanding of the impact of land management on the AWC (applies to the root zone of 0.7 m) and water storage of peat (the amount of water that is stored over the whole peat profile) is limited. In this study, we aimed to deduce possible alterations of the AWC and water storage of peat following peatland drainage and rewetting. We analyzed a comprehensive dataset (676 measurements from boreal and temperate peatlands) to seek relations between bulk density (BD) as a proxy for soil degradation, and field capacity, wilting point as well as AWC. The analyses showed that the AWC increases with BD up to a value of 0.2 g cm−3, and a further increase in BD leads to a considerable decrease in AWC. The function between BD and AWC enables to upscale the AWC to a regional scale using readily available peat BD data. The average AWC of agricultural peatlands in Germany was estimated to be 37.8 ± 11.3 vol% (mean ± standard deviation). Currently, the average water storage of agricultural peatlands in Germany is approximately 19.3 km3 (1.3 m3 per m2), which is less than half of the overall water storage in the natural peatlands in Germany prior drainage (39.6 km3). The conversion of pristine peatlands into agricultural land through artificial drainage resulted in a water storage loss of approximately 20.3 km3, which roughly corresponds to 27 times the volume of the lake Müritz (largest lake entirely within German territory). We conclude that several decades of peatland rewetting would have a limited role in water storage recovery due to a substantial peat thickness loss prior rewetting and low porosity of (formerly) degraded peat.