AbstractAn increase in mean soil surface temperature has been observed over the last century, and it is predicted to further increase in the future. The effect of increased temperature on ecosystem carbon fluxes in a permanent temperate grassland was studied in a long‐term (6 years) field experiment, using multiple temperature increments induced by IR lamps. Ecosystem respiration (R‐eco) and net ecosystem exchange (NEE) were measured and modeled by a modified Lloyd and Taylor model including a soil moisture component for R‐eco (average R2 of 0.78) and inclusion of a photosynthetic component based on temperature and radiation for NEE (R2 = 0.65). Modeled NEE values ranged between 2.3 and 5.3 kg CO2 m−2 year−1, depending on treatment. An increase of 2 or 3°C led to increased carbon losses, lowering the carbon storage potential by around 4 tonnes of C ha−1 year−1. The majority of significant NEE differences were found during night‐time compared to daytime. This suggests that during daytime the increased respiration could be offset by an increase in photosynthetic uptake. This was also supported by differences in δ13C and δ18O, indicating prolonged increased photosynthetic activity associated with the higher temperature treatments. However, this increase in photosynthesis was insufficient to counteract the 24 h increase in respiration, explaining the higher CO2 emissions due to elevated temperature.