Southeast Asian peatlands are climatically important ecosystems, storing approximately 70 billion tons of carbon. Natural and human-induced droughts are lowering peatland water tables, increasing decomposition and the risk of peat-burning wildfires. The rapid nature of carbon losses arising from peatland drainage and accompanying fire-related losses compared to the slow accumulation of peat means that the effects of peatland drainage are essentially irreversible on human timescales. Here, we use a terrestrial biosphere model incorporating vertically-resolved peatland carbon and water dynamics to predict decomposition and fire in Southeast Asia as a result drainage-induced drying. The model captures observed patterns of interannual and seasonal variation in soil moisture and its soil moisture estimates are a better predictor of observed burned area fraction than either precipitation or remotely-sensed estimates of surface soil moisture (r2=0.63, 0.50, 0.56 respectively). Simulations of a fully-drained 1.4 m peat deposit emit an additional 9 tC ha-1 yr-1 and 13 tC ha-1 yr-1 from decomposition and fire respectively. The emissions from decomposition are linearly related to the depth of drainage and can reach up to 31 tC ha-1 yr-1 when fully drained. At regional scales, these estimates imply that 220 MtC yr-1, or 2.2% of global fossil fuel emissions, are being emitted from Indonesian and Malaysian peatlands due to drainage. The vulnerability of these large, concentrated carbon stocks, combined with their long timescale of accumulation, underscore the importance for preserving tropical peatlands to avoid further exacerbation of human induced climate change.