The effect of changing wetland forest to sago palm plantations on methane gas flux and organic carbon dynamics in tropical peat soil was studied in the field and the laboratory using soil samples from the Peat Research Station, Sarawak, Malaysia. A small amount of methane was released from the soil surface of both the forest and plantation field, with no significant difference between the two sites (1·1±0·61 and 1·39±0·82 mg CH4 m−2 hr−1, respectively); thus, the amount of methane emission from the total area of tropical peat soil was estimated, preliminarily, as 2·43 Tg yr−1, contributing 0·45% of the total global methane emission and 2·1% of methane emissions from global natural wetland. However, large amounts of methane were accumulated in the deeper soil layers. Sago palm contained much less carbon as biomass, but lost more as the carbon dissolved in groundwater. Laboratory experiments showed that incorporation of rice straw into tropical peat soil increased methane formation significantly. Conversely, ammonium sulfate suppressed methane formation in tropical peat soil. Copyright © 1998 John Wiley & Sons, Ltd.