Peatlands are large terrestrial stores of carbon, and sustained CO2 sinks, but over the last century large areas have been drained for agriculture and forestry, potentially converting them into net carbon sources. More recently, some peatlands have been re-wetted by blocking drainage ditches, with the aims of enhancing biodiversity, mitigating flooding, and promoting carbon storage. One potential detrimental consequence of peatland re-wetting is an increase in methane (CH4) emissions, offsetting the benefits of increased CO2 sequestration. We examined differences in CH4 emissions between an area of ditch-drained blanket bog, and an adjacent area where drainage ditches were recently infilled. Results showed that Eriophorum vaginatum colonization led to a “hotspot” of CH4 emissions from the infilled ditches themselves, with smaller increases in CH4 from other re-wetted areas. Extrapolated to the area of blanket bog surrounding the study site, we estimated that CH4 emissions were around 60 kg CH4 ha−1 y−1 prior to drainage, reducing to 44 kg CH4 ha−1 y−1 after drainage. We calculated that fully re-wetting this area would initially increase emissions to a peak of around 120 kg CH4 ha−1 y−1, with around two-thirds of the increase (and 90% of the increase over pre-drainage conditions) attributable to CH4 emissions from E. vaginatum-colonized infilled ditches, despite these areas only occupying 7% of the landscape. We predicted that emissions should eventually decline toward pre-drainage values as the ecosystem recovers, but only if Sphagnum mosses displace E. vaginatum from the infilled ditches. These results have implications for peatland management for climate change mitigation, suggesting that restoration methods should aim, if possible, to avoid the colonization of infilled ditches by aerenchymatous species such as E. vaginatum, and to encourage Sphagnum establishment.