Studies on biogeochemical cycling of carbon in the Chilka Lake, Asia's largest brackish lagoon on the east coast of India, revealed, for the first time, strong seasonal and spatial variability associated with salinity distribution. The lake was studied twice during May 2005 (premonsoon) and August 2005 (monsoon). It exchanges waters with the sea (Bay of Bengal) and several rivers open into the lake. The lake showed contrasting levels of dissolved inorganic carbon (DIC) and organic carbon (DOC) in different seasons; DIC was higher by ∼22% and DOC was lower by ∼36% in premonsoon than in monsoon due to seasonal variations in their supply from rivers and in situ production/mineralisation. The DIC/DOC ratios in the lake during monsoon were influenced by physical mixing of end member water masses and by intense respiration of organic carbon. A strong relationship between excess DIC and apparent oxygen utilisation showed significant control of biological processes over CO2 production in the lake. Surface partial pressure of CO2 (pCO2), calculated using pH–DIC couple according to Cai and Wang (Limnol and Oceanogr 43:657–668, 1998), exhibited discernable gradients during monsoon through northern (1,033–6,522 μatm), central (391–2,573 μatm) and southern (102–718 μatm) lake. The distribution pattern of pCO2 in the lake seems to be governed by pCO2 levels in rivers and their discharge rates, which were several folds higher during monsoon than premonsoon. The net CO2 efflux, based on gas transfer velocity parameterisation of Borges et al. (Limnol and Oceanogr 49(5):1630–1641, 2004), from entire lake during monsoon (141 mmolC m−2 d−1 equivalent to 2.64 GgC d−1 at basin scale) was higher by 44 times than during premonsoon (9.8 mmolC m−2 d−1 ≈ 0.06 GgC d−1). 15% of CO2 efflux from lake in monsoon was contributed by its supply from rivers and the rest was contributed by in situ heterotrophic activity. Based on oxygen and total carbon mass balance, net ecosystem production (NEP) of lake (−308 mmolC m−2 d−1 ≈ −3.77 GgC d−1) was found to be almost in consistent with the total riverine organic carbon trapped in the lake (229 mmolC m−2 d−1 ≈ 2.80 GgC d−1) suggesting that the strong heterotrophy in the lake is mainly responsible for elevated fluxes of CO2 during monsoon. Further, the pelagic net community production represented 92% of NEP and benthic compartment plays only a minor role. This suggests that Chilka lake is an important region in biological transformation of organic carbon to inorganic carbon and its export to the atmosphere.