Extreme climatic events such as droughts are likely to result in huge and long-lasting effects on regional ecosystem health if large numbers of foundation tree species continue to die. Although deforestation is severe in the Ethiopian highlands, some remnants of dry afromontane forests still exist. However, the resilience of these forests under climate change scenarios is unknown. Therefore, we studied (1) the extent and spatial patterns of standing dead stems along an elevational gradient and (2) the effects of dieback on forest carbon sequestration potential and aboveground carbon stocks, in Juniperus procera and Olea europaea dominated dry afromontane forest in northern Ethiopia, using allometric models combined with tree ring analysis. Juniperus procera and Olea europaea constitute 67% of the total tree population. Tree dieback affected a quarter of the total population. This loss is critical because 92.2% of snags belong to J. procera and O. europaea, which are the foundation species of the study forest. The total estimated mean aboveground C-stock was 19.3 (±3.9) Mg C ha!1. Of this estimate, snags contributed 34.5% of total C-stock. The estimated annual C-sequestration potential of the study forest was 0.33 (±0.03) Mg C ha!1 year!1, which is 27% less when compared to the pre-tree dieback C-sequestration potential. We found a decreasing trend in tree dieback with increasing elevation, which implies that the aboveground C-stocks and climate change mitigation potentials of the forest, was highly affected at lower elevations which is the drier part of the landscape. Tree ring analysis showed that trees reach medium-sized stem diameter (i.e., 20-25 cm) after no less than 100 years, indicating that the effect of forest dieback on C-sequestration potential and ecosystem function is long-lasting. Our results provide information on the magnitude of tree dieback and its long-lasting impact on forest carbon fluxes and forest ecosystem services. Evidently, the results substantiate the importance of protecting such forest to maintain the quality of the environment and to reduce efforts and cost for forest restoration after major loss. Finally, the information gained by this study provides baseline information for comparison of future carbon sequestration estimates.