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Abstract Seagrass meadows constitute important carbon sinks, and the ongoing global loss of seagrass habitats raises concerns about the release of carbon stored in their sediments. However, the actual consequences of seagrass loss for the release of carbon and nutrients remain unclear. Here, we take advantage of well‐documented historic losses of eelgrass (Zostera marina) meadows along the Swedish NW coast to assess how the contents of organic carbon (C) and nitrogen (N) in the sediment change when a meadow is lost. We find unusually high contents of C and N (on average 3.7% and 0.39% DW, respectively) in Swedish eelgrass sediments down to >100 cm depth, suggesting that these habitats constitute global hot spots for C and N storage. However, the C and N stocks were strongly influenced by wave exposure and were almost twice as high in sheltered compared to exposed eelgrass meadows. The sediment composition and stable isotope values were distinctly different in areas that have lost eelgrass meadows, with on average >2.6 times lower contents of C and N. The results indicate an erosion of >35 cm sediment following the historical eelgrass loss, and that sheltered meadows have more vulnerable sediment stocks. The results suggest that eelgrass loss has resulted in a release of 60.2 Mg C and 6.63 Mg N per hectare, with an estimated economic cost to society of 7944 and 141,355 US$/ha, respectively. The value of N storage represents one of the highest monetary values presented for an ecosystem service provided by seagrasses and shows that Swedish eelgrass meadows are particularly important for mitigating eutrophication. Following a documented loss of approximately 10 km2 of eelgrass in the study area, it is estimated that over 60,000 Mg of nitrogen was released to the coastal environment over a 20‐yr period, which constitutes over three times the annual river load of nitrogen to the Swedish NW coast. The study exemplifies the significant role of seagrass sediments as sinks for both carbon and nutrients, and that the risk of nutrient release following vegetation loss should be taken into account in the spatial management of seagrass and other coastal habitats.