Drainage intensity and forest management in peatlands affect carbon dioxide (CO2) emissions to the atmosphere and export of dissolved organic carbon (DOC) to water courses. The peatland carbon (C) balance results from a complex network of ecosystem processes from where lateral C fluxes have typically been ignored. Here, we present a new version of the SUSI Peatland simulator, the first advanced process-based ecosystem model that compiles a full C balance in drained forested peatland including DOC formation, transport and biodegradation. SUSI considers site, stand and terrain characteristics as well as the interactions and feedbacks between ecosystem processes and offers novel ways to evaluate and mitigate adverse environmental impacts with thorough management planning. Here, we extended SUSI by designing and parameterizing a mass-balance based decomposition module (ESOM) based on literature findings and tested the ESOM performance against an independent dataset measured in the laboratory using peat columns collected from Finland, Estonia, Sweden and Ireland. ESOM predicted the CO2 emissions and changes in DOC concentrations with a reasonable accuracy for the peat columns. We applied the new SUSI for drained peatland sites and found that reducing the depth to which ditches are cleaned by 0.3 m decreased the annual DOC export by 34 (17 %), 29 (19 %) and 7 (5 %) kg ha−1 in Finland, Estonia and Sweden, respectively, using typical ditch spacing for these countries. Correspondingly, site annual C sink increased by 305, 409 and 32 kg ha−1 in Finland, Estonia and Sweden, respectively. Our results also indicated that terrain slope can markedly alter the water residence time and consequently DOC biodegradation and export to ditches. We conclude that DOC export can be decreased and site C sink increased by reducing the depth to which ditches are cleaned or by increasing the ditch spacing.