The Palaeocene-Eocene thermal maximum (PETM), a rapid global warming event and carbon-cycle perturbation of the early Palaeogene, provides a unique test of climate and carbon-cycle models as well as our understanding of sedimentary methane hydrate stability, albeit under conditions very different from the modern. The principal expression of the PETM in the geological record is a large and rapid negative excursion in the carbon isotopic composition of carbonates and organic matter from both marine and terrestrial environments. Palaeotemperature proxy data from across the PETM indicate a coincident increase in global surface temperatures of approximately 5-6 degrees C. Reliable estimates of atmospheric CO(2) changes and global warming through past transient climate events can provide an important test of the climate sensitivities reproduced by state-of-the-art atmosphere-ocean general circulation models. Here, we synthesize the available carbon-cycle model estimates of the magnitude of the carbon input to the ocean-atmosphere-biosphere system, and the consequent atmospheric pCO(2) perturbation, through the PETM. We also review the theoretical mass balance arguments and available sedimentary evidence for the role of massive methane hydrate dissociation in this event. The plausible range of carbon mass input, approximately 4000-7000 PgC, strongly suggests a major alternative source of carbon in addition to any contribution from methane hydrates. We find that the potential range of PETM atmospheric pCO(2) increase, combined with proxy estimates of the PETM temperature anomaly, does not necessarily imply climate sensitivities beyond the range of state-of-the-art climate models.