Tropical forests are among the largest terrestrial reservoirs of carbon, and play an important role in regulating global climate. However, as a result of historic and ongoing deforestation, carbon storage in this biome is increasingly dependent on forests that are fragmented and used by humans, with considerable uncertainty about how such disturbance alters carbon storage potential and cycling. Here, we evaluate differences in above-ground carbon stocks between fragmented and contiguous evergreen forests in the central Western Ghats, India. We also assess differences in the structure, tree allometry and functional composition of forest stands between contiguous and fragmented forests, and explore how these differences influence carbon storage in fragmented forests. Relatively large, well-protected forest fragments currently store 40% less carbon per hectare above ground than contiguous forests. These differences in carbon are related to (i) lower tree density and basal area in fragments, (ii) lower average stand height in fragments, and (iii) compositional shifts favoring species with lower wood densities. Reduced stand height in fragments was associated with intra-specific variation in tree allometry, with trees in fragments being relatively shorter at any given diameter than conspecifics in contiguous forests. Further, the relatively skewed distribution of carbon storage within a few large trees in current-day fragments is added cause for concern: carbon stocks in fragments are likely to decline further in the future, following the eventual death of large trees. Active management and restoration to mitigate ecologically driven changes in habitat structure and species composition might be as important as improved management of resource use and protection from exploitation in order to sustain carbon storage ecosystem services provided by these tropical forest fragments.