With accumulation of carbon cycle observations and model developments over the past decades, exploring interannual variation (IAV) of terrestrial carbon cycle offers the opportunity to better understand climate–carbon cycle relationships. However, despite growing research interest, uncertainties remain on some fundamental issues, such as the contributions of different regions, constituent fluxes and climatic factors to carbon cycle IAV. Here we overviewed the literature on carbon cycle IAV about current understanding of these issues. Observations and models of the carbon cycle unanimously show the dominance of tropical land ecosystems to the signal of global carbon cycle IAV, where tropical semiarid ecosystems contribute as much as the combination of all other tropical ecosystems. Vegetation photosynthesis contributes more than ecosystem respiration to IAV of the global net land carbon flux, but large uncertainties remain on the contribution of fires and other disturbance fluxes. Climatic variations are the major drivers to the IAV of net land carbon flux. Although debate remains on whether the dominant driver is temperature or moisture variability, their interaction,that is, the dependence of carbon cycle sensitivity to temperature on moisture conditions, is emerging as key regulators of the carbon cycle IAV. On timescales from the interannual to the centennial, global carbon cycle variability will be increasingly contributed by northern land ecosystems and oceans. Therefore, both improving Earth system models (ESMs) with the progressive understanding on the fast processes manifested at interannual timescale and expanding carbon cycle observations at broader spatial and longer temporal scales are critical to better prediction on evolution of the carbon–climate system.