Moisture response functions for soil microbial carbon (C) mineralization remain a critical uncertainty for predicting ecosystem-climate feedbacks. Theory and models posit that C mineralization declines under elevated moisture and associated anaerobic conditions, leading to soil C accumulation. Yet, iron (Fe) reduction potentially releases protected C, providing an under-appreciated mechanism for C destabilization under elevated moisture. Here we incubate Mollisols from ecosystems under C3/C4 plant rotations at moisture levels at and above field capacity over 5 months. Increased moisture and anaerobiosis initially suppress soil C mineralization, consistent with theory. However, after 25 days, elevated moisture stimulates cumulative gaseous C-loss as CO2 and CH4 to >150% of the control. Stable C isotopes show that mineralization of older C3-derived C released following Fe reduction dominates C losses. Counter to theory, elevated moisture may significantly accelerate C losses from mineral soils over weeks to months-a critical mechanistic deficiency of current Earth system models.