Invasion of non-native annuals across the Intermountain West is causing a widespread transition from perennial sagebrush communities to fire-prone annual herbaceous communities and grasslands. To determine how this invasion affects ecosystem function, carbon and water fluxes were quantified in three, paired sagebrush and adjacent postfire communities in the northern Great Basin using a 1-m3 gas exchange chamber. Most of the plant cover in the postfire communities was invasive species including Bromus tectorum L., Agropyron cristatum (L.) Gaertn and Sisymbrium altissimum L. Instantaneous morning net carbon exchange (NCE) and evapotranspiration (ET) in native shrub plots were greater than either intershrub or postfire plots. Native sagebrush communities were net carbon sinks (mean NCE 0.2-4.3 µmol m-2 s-1) throughout the growing season. The magnitude and seasonal variation of NCE in the postfire communities were controlled by the dominant species and availability of soil moisture. Net C exchange in postfire communities dominated by perennial bunchgrasses was similar to sagebrush. However, communities dominated by annuals (cheatgrass and mustard) had significantly lower NCE than sagebrush and became net sources of carbon to the atmosphere (NCE declined to -0.5 µmol m-2 s-1) with increased severity of the summer drought. Differences in the patterns of ET led to lower surface soil moisture content and increased soil temperatures during summer in the cheatgrass-dominated community compared to the adjacent sagebrush community. Intensive measurements at one site revealed that temporal and spatial patterns of NCE and ET were correlated most closely with changes in leaf area in each community. By altering the patterns of carbon and water exchange, conversion of native sagebrush to postfire invasive communities may disrupt surface-atmosphere exchange and degrade the carbon storage capacity of these systems. © Springer-Verlag 2005.