Climate warming in discontinuous permafrost peatlands is causing permafrost loss and changes in ecosystem dynamics at an unprecedented rate. Though rates of permafrost loss and landscape change have been widely documented based on remote sensing and field measurements, the local mechanisms of permafrost degradation remain under‐studied. These mechanisms were explored using data collected over three decades of research in the Scotty Creek study basin in the southern Northwest Territories of Canada. The data, when compared to numerical modeling results, demonstrated that vertical heat conduction accounts for most vertical permafrost degradation, while advective heat transfer drives thaw in features which are subject to seasonal flows. It was found that heat advection was necessary to describe lateral thaw rates of up to 115 cm annually, which are an order of magnitude greater than vertical thaw rates, which average 10 cm annually. Thaw from below, driven either by the geothermal gradient or groundwater flow, may account for up to 10 cm of permafrost thaw annually. The hydrologic, thermodynamic and geophysical function of taliks in different parts of the landscape were considered in light of the data collected at the field site and surrounding area. This analysis is supported through the use of ERT data detailing the subsurface permafrost structure. This understanding of local thaw mechanisms and trajectory is an important first step in being able to predict distributed permafrost thaw in peatlands.