Intensive mechanized agriculture in the Brazilian Amazon grew by >3.6 million hectares (ha) during 2001–2004. Whether this cropland expansion resulted from intensified use of land previously cleared for cattle ranching or new deforestation has not been quantified and has major implications for future deforestation dynamics, carbon fluxes, forest fragmentation, and other ecosystem services. We combine deforestation maps, field surveys, and satellite-based information on vegetation phenology to characterize the fate of large (>25-ha) clearings as cropland, cattle pasture, or regrowing forest in the years after initial clearing in Mato Grosso, the Brazilian state with the highest deforestation rate and soybean production since 2001. Statewide, direct conversion of forest to cropland totaled >540,000 ha during 2001–2004, peaking at 23% of 2003 annual deforestation. Cropland deforestation averaged twice the size of clearings for pasture (mean sizes, 333 and 143 ha, respectively), and conversion occurred rapidly; >90% of clearings for cropland were planted in the first year after deforestation. Area deforested for cropland and mean annual soybean price in the year of forest clearing were directly correlated (R²= 0.72), suggesting that deforestation rates could return to higher levels seen in 2003–2004 with a rebound of crop prices in international markets. Pasture remains the dominant land use after forest clearing in Mato Grosso, but the growing importance of larger and faster conversion of forest to cropland defines a new paradigm of forest loss in Amazonia and refutes the claim that agricultural intensification does not lead to new deforestation.

Approximately 2.5 × 10 ⁶ square kilometers of the Amazon forest are currently degraded by fire, edge effects, timber extraction, and/or extreme drought, representing 38% of all remaining forests in the region. Carbon emissions from this degradation total up to 0.2 petagrams of carbon per year (Pg C year ⁻¹ ), which is equivalent to, if not greater than, the emissions from Amazon deforestation (0.06 to 0.21 Pg C year ⁻¹ ). Amazon forest degradation can reduce dry-season evapotranspiration by up to 34% and cause as much biodiversity loss as deforestation in human-modified landscapes, generating uneven socioeconomic burdens, mainly to forest dwellers. Projections indicate that degradation will remain a dominant source of carbon emissions independent of deforestation rates. Policies to tackle degradation should be integrated with efforts to curb deforestation and complemented with innovative measures addressing the disturbances that degrade the Amazon forest.

There has been an increasing awareness of the possibility of climate change causing increased drought frequency in Amazonia, with ensuing impacts on ecosystems and human populations. This debate has been brought into focus by the 1997/1998 and 2005 Amazonian droughts. We analysed the spatial extent of these droughts and fire response to the 2005 drought with TRMM and NOAA‐12 data, respectively. Both droughts had distinct fingerprints. The 2005 drought was characterized by its intensification throughout the dry season in south‐western Amazonia. During 2005 the annual cumulative number of hot pixels in Amazonia increased 33% in relation to the 1999–2005 mean. In the Brazilian state of Acre, at the epicentre of the 2005 drought, the area of leakage forest fires was more than five times greater than the area directly deforested. Fire leakage into flammable forests may be the major agent of biome transformation in the event of increasing drought frequency.