Native forests on tropical islands have been displaced by non-native species, leading to calls for their transformation. Simultaneously, there is increasing recognition that tropical forests can help sequester carbon that would otherwise enter the atmosphere. However, it is unclear if native forests sequester more or less carbon than human-altered landscapes. At Palmyra Atoll, efforts are underway to transform the rainforest composition from coconut palm (Cocos nucifera) dominated to native mixed-species. To better understand how this landscape-level change will alter the atoll’s carbon dynamics, we used field sampling, remote sensing, and parameter estimates from the literature to model the total carbon accumulation potential of Palmyra’s forest before and after transformation. The model predicted that replacing the C. nucifera plantation with native species would reduce aboveground biomass from 692.6 to 433.3 Mg C. However, expansion of the native Pisonia grandis and Heliotropium foertherianum forest community projected an increase in soil carbon to at least 13,590.8 Mg C, thereby increasing the atoll’s overall terrestrial carbon storage potential by 11.6%. Nearshore sites adjacent to C. nucifera canopy had a higher dissolved organic carbon (DOC) concentration (110.0 μMC) than sites adjacent to native forest (81.5 μMC), suggesting that, in conjunction with an increase in terrestrial carbon storage, replacing C. nucifera with native forest will reduce the DOC exported from the forest into in nearshore marine habitats. Lower DOC levels have potential benefits for corals and coral dependent communities. For tropical islands like Palmyra, reverting from C. nucifera dominance to native tree dominance could buffer projected climate change impacts by increasing carbon storage and reducing coral disease.