Northern peatlands store large amounts of carbon. Observations indicate that forests and peatlands in northern biomes can be alternative stable states for a range of landscape settings. Climatic and hydrological changes may reduce the resilience of peatlands and forests, induce persistent shifts between these states, and release the carbon stored in peatlands. Here, we present a dynamic simulation model constrained and validated by a wide set of observations to quantify how feedbacks in water and carbon cycling control resilience of both peatlands and forests in northern landscapes. Our results show that 34% of Europe (area) has a climate that can currently sustain existing rainwater-fed peatlands (raised bogs). However, raised bog initiation and restoration by water conservation measures after the original peat soil has disappeared is only possible in 10% of Europe where the climate allows raised bogs to initiate and outcompete forests. Moreover, in another 10% of Europe, existing raised bogs (concerning ∼20% of the European raised bogs) are already affected by ongoing climate change. Here, forests may overgrow peatlands, which could potentially release in the order of 4% (∼24 Pg carbon) of the European soil organic carbon pool. Our study demonstrates quantitatively that preserving and restoring peatlands requires looking beyond peatland-specific processes and taking into account wider landscape-scale feedbacks with forest ecosystems.