Extreme climate events are becoming more frequent, with poorly understood implications for carbon sequestration by terrestrial ecosystems. A better understanding will critically depend on accurate and precise quantification of ecosystems responses to these events. Taking the 2019 US Midwest floods as a case study, we investigate current capabilities for tracking regional flux anomalies with “top-down” inversion analyses that assimilate atmospheric CO2 observations. For this analysis, we develop a regionally nested version of the NASA Carbon Monitoring System-Flux (CMS-Flux) that allows high resolution atmospheric transport (0.5° × 0.625°) over a North America domain. Relative to a 2018 baseline, we find US Midwest growing season net carbon uptake is reduced by 11-57 TgC (3-16%) for 2019 (inversion mean estimates across experiments). These estimates are found to be consistent with independent “bottom-up” estimates of carbon uptake based on vegetation remote sensing. We then investigate current limitations in tracking regional carbon emissions and removals by ecosystems using “top-down” methods. In a set of observing system simulation experiments, we show that the ability to recover regional carbon flux anomalies is still limited by observational coverage gaps for both in situ and satellite observations. Future space-based missions that allow for daily observational coverage across North America would largely mitigate these observational gaps, allowing for improved top-down estimates of ecosystem responses to extreme climate events.