Studies of restoration ecology are well established for northern peatlands, but at an early stage for tropical peatlands. Extensive peatland areas in Southeast Asia have been degraded through deforestation, drainage and fire, leading to on- and off-site environmental and socio-economic impacts of local to global significance. To address these problems, landscape-scale restoration measures are urgently required. This paper reviews and illustrates, using information from on-going trials in Kalimantan, Indonesia, the current state of knowledge pertaining to (i) land-cover dynamics of degraded peatlands, (ii) vegetation rehabilitation, (iii) restoration of hydrology, (iv) rehabilitation of carbon sequestration and storage, and (v) promotion of sustainable livelihoods for local communities. For a 4500 km2 study site in Central Kalimantan, Indonesia, we show a 78% reduction in forest cover between 1973 and 2003 and demonstrate that fire, exacerbated by drainage, is the principal driver of land-use change. Progressive vegetation succession follows infrequent, low-intensity fires, but repeated and high-intensity fires result in retrogressive succession towards non-forest communities. Re-wetting the peat is an important key to vegetation restoration and protection of remaining peat carbon stocks. The effectiveness of hydrological restoration is discussed and likely impacts on greenhouse gas emissions evaluated. Initial results indicate that raised water levels have limited short-term impact on reducing CO2 emissions, but could be critical in reducing fire risk. We conclude that successful restoration of degraded peatlands must be grounded in scientific knowledge, relevant to socio-economic circumstances, and should not proceed without the consent and co-operation of local communities.