Research focusing on seagrass ecosystems as carbon storage has been conducted in various Indonesian waters. However, an essential aspect that remains unexplored is the simultaneous analysis of blue carbon storage in seagrass alongside carbon dioxide (CO2) flux values, particularly within Karimunjawa waters. This study aims to assess the organic carbon stock and sea–air CO2 flux in seagrass ecosystems in Karimunjawa. Our hypothesis posits that although seagrass ecosystems release CO2 into the water, their role as blue carbon ecosystems enables them to absorb and accumulate organic carbon within seagrass biomass and sediments. This investigation took place in Karimunjawa waters, encompassing both vegetated (seagrass meadows) and unvegetated (non-seagrass meadows) areas during August 2019, 2020, and 2022. Over this period, the organic carbon stock in seagrass and sediment displayed an increase, rising from 28.90 to 35.70 gCorg m−2 in 2019 and from 37.80 to 45.25 gCorg m−2 in 2022. Notably, the expanse of seagrass meadows in Karimunjawa dwindled by 328.33 ha from 2019 to 2022, resulting in a total carbon stock reduction of the seagrass meadows of 452.39 tC to 218.78 tC. Sediment emerges as a pivotal element in the storage of blue carbon in seagrass, with sedimentary organic carbon outweighing seagrass biomass in storage capacity. The conditions in Karimunjawa, including a high A:B ratio, low dry bulk density, and elevated water content, foster a favorable environment for sediment carbon absorption and storage, facilitated by the waters’ CO2 emission during the southeast monsoon season. Notably, our findings reveal that CO2 release within vegetated areas is lower compared to unvegetated areas. This outcome underscores how seagrass ecosystems can mitigate CO2 release through their adeptness at storing organic carbon within biomass and sediment. However, the presence of inorganic carbon in the form of calcium carbonate introduces a nuanced dynamic. This external source, stemming from allochthonous origins like mangroves, brown algae like Padina pavonica, and calcareous epiphytes, leads to an increase in sedimentary organic carbon stock of 53.2 ± 6.82 gCorg m−2. Moreover, it triggers the release of CO2 into the atmosphere, quantified at 83.4 ± 18.26 mmol CO2 m−2 d−1.