BACKGROUND: Globally, the loss of forests now contributes almost 20% of carbon dioxide emissions to the atmosphere. There is an immediate need to reduce the current rates of forest loss, and the associated release of carbon dioxide, but for many areas of the world these rates are largely unknown. The Soviet Union contained a substantial part of the world's forests and the fate of those forests and their effect on carbon dynamics remain unknown for many areas of the former Eastern Bloc. For Georgia, the political and economic transitions following independence in 1991 have been dramatic. In this paper we quantify rates of land use changes and their effect on the terrestrial carbon budget for Georgia. A carbon book-keeping model traces changes in carbon stocks using historical and current rates of land use change. Landsat satellite images acquired circa 1990 and 2000 were analyzed to detect changes in forest cover since 1990. RESULTS: The remote sensing analysis showed that a modest forest loss occurred, with approximately 0.8% of the forest cover having disappeared after 1990. Nevertheless, growth of Georgian forests still contribute a current national sink of about 0.3 Tg of carbon per year, which corresponds to 31% of the country anthropogenic carbon emissions. CONCLUSIONS: We assume that the observed forest loss is mainly a result of illegal logging, but we have not found any evidence of large-scale clear-cutting. Instead local harvesting of timber for household use is likely to be the underlying driver of the observed logging. The Georgian forests are a currently a carbon sink and will remain as such until about 2040 if the current rate of deforestation persists. Forest protection efforts, combined with economic growth, are essential for reducing the rate of deforestation and protecting the carbon sink provided by Georgian forests.