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Woody encroachment is a widespread and acute phenomenon affecting grasslands and savannas worldwide. We performed a meta-analysis of 29 studies from 13 different grassland/savanna communities in North America to determine the consequences of woody encroachment on plant species richness. In all 13 communities, species richness declined with woody plant encroachment (average decline = 45%). Species richness declined more in communities with higher precipitation (r2 = 0.81) and where encroachment was associated with a greater change in annual net primary productivity (ANPP, r2 = 0.69). Based on the strong positive correlation between precipitation and ANPP following encroachment (r2 = 0.87), we hypothesize that these relationships occur because water-limited woody plants experience a greater physiological and demographic release as precipitation increases. The observed relationship between species richness and ANPP provides support for the theoretical expectation that a trade-off occurs between richness and productivity in herbaceous communities. We conclude that woody plant encroachment leads to significant declines in species richness in North American grassland/savanna communities.