In the central part of the Netherlands, wetland restoration projects involve the rewetting of former agricultural land, where low water levels were artificially maintained (polders). Many of these projects do not result in the expected reduction of nitrogen and phosphorus availability and subsequent re-establishment of a diverse wetland vegetation. The aim of the present study was to investigate which mechanisms are responsible for this lack of success. Thereto, we studied the effect of rewetting of former agricultural grasslands on acidified peat soil (pH = 3.5) on organic matter decomposition, nitrogen cycling and phosphorus availability in the soil for three seasons. To provide an explanation for the observed effects, we simultaneously studied a set of potentially controlling abiotic soil conditions that were expected to change after rewetting. It was found that rewetting of these grasslands with natural, unpolluted seepage water did not affect nitrogen cycling, but raised decomposition rates and almost doubled phosphorus availability. The main cause of these effects is a raise of soil pH to about 7 due to the hydrochemical composition of the soil pore water after rewetting, which reflects groundwater with high amounts of buffering ions. This effect overruled any reduction in process rates by the lowered soil redox potential. The counterintuitive finding of eutrophication after rewetting with natural and unpolluted water is considered to represent a new form of internal eutrophication, triggered by the restoration of natural site conditions of former agricultural land on acid peat soil. © 2004 Kluwer Academic Publishers.