Terrestrial ecosystems are vital for achieving carbon neutrality, yet the distinction between their biophysical limits and realizable potential remains unclear. Here, we developed an integrated framework to quantify China's terrestrial theoretical carbon sequestration potential (CSP) and actual CSP under diverse climate and management scenarios, incorporating vegetation dynamics and soil carbon stocks through 2100. We estimated current terrestrial carbon stock at 95.3 Pg C, with a theoretical CSP of 166.4 Pg C. By the 2060s, afforestation could expand by 77.5 Mha, representing 8% of China’s land area. For actual CSP, peak CSP is projected to reach 0.35 Pg C yr <jats:sup>−1</jats:sup> during 2020–2060, declining to 0.12 Pg C yr <jats:sup>−1</jats:sup> from 2060 to 2100 under the SSP119 scenario combined with forest expansion. Actual CSP remains significantly below the theoretical limit. Speciafically, a gap of 51.5–57.9 Pg C remains between actual and theoretical CSP across all scenarios. However, strategic reforestation coupled with low emissions could reduce this gap by approximately 15 Pg C by 2100. These findings differentiated the theoretical and actual CSP, providing quantitative baselines for China's carbon sink capacity and actionable guidance for achieving carbon neutrality through optimized land use.