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This research investigated carbon dynamics, water dynamics and peat formation at Wellington Plain peatland in the Victorian Alps. The properties of bog peat and dried peat were measured, and the ensuing results are outlined below. The carbon chemistries of both bog peat and dried peat displayed changes with depth consistent with an increase in the extent of decomposition of the organic material. Representative changes in the alkyl:O-alkyl ratio down the profile were 0.14 to 0.96 for bog peat and 0.28 to 1.07 for dried peat. Laboratory incubations on the influence of chemistry, particle size, water content and sample preparation indicated that, in the absence of confounding factors, peat chemistry was the most important factor in determining the size of the mineralisable carbon pool. Water content was the most important factor in determining the rate of carbon mineralization. In the field, both bog peat and dried peat emitted an average of 2 g CO2/m2/d from the surface. Carbon mineralisation was related to both soil temperature and soil water content, and this relationship was used to model peat mineralisation under a range of possible future climate scenarios. Below the surface, however, I measured lower rates of decomposition in the dried peat than in the bog peat. The water-holding capacity of peat was measured in the laboratory, as was the rate of water movement through peat. Specific yield decreased down the profile in both bog peat (0.88 to 0.45 cm3/cm3) and dried peat (0.36 to 0.11 cm3/cm3). Hydraulic conductivity also decreased down the profile in both peats: 5.1x10-4 to 3.0x10-6 m/s in bog peat, and 1.0x10-4 to 7.0x10-6 m/s in dried peat. Relationships between the hydrologic properties of peat and its physical and chemical properties were identified. In the field, fluctuations in the watertable were monitored in concert with rainfall. These laboratory and field measurements enabled me to develop models of the hydrology of bog peat and dried peat. Radioisotope dating indicated that both bog peat and dried peat began forming around 3300 years ago. The bog peat appeared to have drained to form dried peat between 131 and 139 years ago. Since that time, erosion appeared to have contributed more to the loss of organic material from dried peat than carbon mineralisation had.