The challenges posed by climate change and biodiversity loss are deeply interconnected. Successful co-managing of these tangled drivers requires innovative methods that can prioritize and target management actions against multiple criteria, while also enabling cost-effective land use planning and impact scenario assessment. This paper synthesises the development and application of an integrated multidisciplinary modelling and evaluation framework for carbon and biodiversity in forest systems. By analysing and spatio-temporally modelling carbon processes and biodiversity elements, we determine an optimal solution for their co-management in the study landscape. We also describe how advanced Earth Observation measurements can be used to enhance mapping and monitoring of biodiversity and ecosystem processes. The scenarios used for the dynamic models were based on official Finnish policy goals for forest management and climate change mitigation. The development and testing of the system were executed in a large region in southern Finland (Kokemäenjoki basin, 27,024 km2) containing highly instrumented LTER (Long-Term Ecosystem Research) stations; these LTER data sources were complemented by fieldwork, remote sensing and national data bases. In the study area, estimated total net emissions were currently 4.2 TgCO2eq a−1, but modelling of forestry measures and anthropogenic emission reductions demonstrated that it would be possible to achieve the stated policy goal of carbon neutrality by low forest harvest intensity. We show how this policy-relevant information can be further utilized for optimal allocation of set-aside forest areas for nature conservation, which would significantly contribute to preserving both biodiversity and carbon values in the region. Biodiversity gain in the area could be increased without a loss of carbon-related benefits.