Ecosystem responses to increased variability in rainfall, a prediction of general circulation models, were assessed in native grassland by reducing storm frequency and increasing rainfall quantity per storm during a 4-year experiment. More extreme rainfall patterns, without concurrent changes in total rainfall quantity, increased temporal variability in soil moisture and plant species diversity. However, carbon cycling processes such as soil CO2 flux, CO2 uptake by the dominant grasses, and aboveground net primary productivity (ANPP) were reduced, and ANPP was more responsive to soil moisture variability than to mean soil water content. Our results show that projected increases in rainfall variability can rapidly alter key carbon cycling processes and plant community composition, independent of changes in total precipitation.