This paper presents results from an analysis of the economic potential for soil carbon sequestration in the Nioro region of Senegal’s Peanut Basin. This analysis was based on the linkage of site-specific biophysical models and economic simulation models using the Tradeoff Analysis System to simulate farmers’ participation in contracts to sequester soil carbon. Available soils and climate data were used to implement the DSSAT/Century models to estimate crop yields and changes in soil carbon stocks under nine scenarios of increased fertilizer use and increased incorporation of crop residues in a peanut-millet rotation. Data from the 2001 farm survey conducted by the Ecole Nationale d’Economie Appliquée were used to parameterize a spatially explicit econometric-process simulation model for the peanut-millet production system. The economic simulation model was used to simulate a carbon-payment scheme that requires farmers to apply higher fertilizer rates and incorporate some crop residues into the soil. The results show that the combination of increased fertilizer use and crop residue incorporation could result in the supply of marketable quantities of carbon that could be sequestered in the soils of the Nioro region. However, the sensitivity of results to the levels of labor costs of incorporating crop residues, the value of crop residues, and the transaction costs of implementing carbon payment schemes, suggests the need for better data on these variables and for an accurate assessment of the capabilities of local institutions to implement carbon contracts.