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This paper discusses traditional solutions for carbon neutral construction in arctic conditions. We consider that vernacular architecture forms an important source of knowledge to resource-wise, energy-efficient and sustainable ways to organize human dwellings and settlements. The key tasks of our research were to (1) identify the factors of traditional arctic construction that have an impact to sustainability and carbon-neutrality of arctic building and to (2) develop and assess a type building for arctic districts (Finland), based on traditional solutions, that fulfills the functional prerequisites for modern living comfort and energy requirements. The study is based on literature, fieldwork and Life Cycle Assessment calculations for the theoretical case. The life cycle assessment includes greenhouse gas emissions and carbon storage in timber and bio-based materials. Energy usage follows the principles of carbon neutrality. Wooden products used in the construction store biogenic carbon from the product stage to the building demolition stage. The case study calculations showed that operational energy demand could be fulfilled with the use of solar PV, solar collectors, ground source energy and district-scale wind energy supply. Results show that the biogenic carbon content is more than enough to offset the emissions from building materials and renewable energy technologies needed for operating the building. The research was funded by the Finnish Ministry for Foreign Affairs.