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1. Studying the effects of climate or weather extremes such as drought and heat waves on biodiversity and ecosystem functions is one of the most important facets of climate change research. In particular, primary production is amounting to the common currency in field experiments world-wide. Rarely, however, are multiple ecosystem functions measured in a single study in order to address general patterns across different categories of responses and to analyse effects of climate extremes on various ecosystem functions. 2. We set up a long-term field experiment, where we applied recurrent severe drought events annually for five consecutive years to constructed grassland communities in central Europe. The 32 response parameters studied were closely related to ecosystem functions such as primary production, nutrient cycling, carbon fixation, water regulation and community stability. 3. Surprisingly, in the face of severe drought, above- and below-ground primary production of plants remained stable across all years of the drought manipulation. 4. Yet, severe drought significantly reduced below-ground performance of microbes in soil indicated by reduced soil respiration, microbial biomass and cellulose decomposition rates as well as mycorrhization rates. Furthermore, drought reduced leaf water potential, leaf gas exchange and leaf protein content, while increasing maximum uptake capacity, leaf carbon isotope signature and leaf carbohydrate content. With regard to community stability, drought induced complementary plant-plant interactions and shifts in flower phenology, and decreased invasibility of plant communities and primary consumer abundance. 5. Synthesis. Our results provide the first field-based experimental evidence that climate extremes initiate plant physiological processes, which may serve to regulate ecosystem productivity. A potential reason for different dynamics in various ecosystem services facing extreme climatic events may lie in the temporal hierarchy of patterns of fast versus slow response. Such data on multiple response parameters within climate change experiments foster the understanding of mechanisms of resilience, of synergisms or decoupling of biogeochemical processes, and of fundamental response dynamics to drought at the ecosystem level including potential tipping points and thresholds of regime shift. Future work is needed to elucidate the role of biodiversity and of biotic interactions in modulating ecosystem response to climate extremes.