Woody plant encroachment has occurred in semiarid grasslands worldwide, including those of the southwestern United States. The goal of our research is to determine changes in ecosystem carbon storage following woody plant encroachment in semiarid grasslands. We are conducting research at the Sevilleta Long Term Ecological Research site in central New Mexico, USA, where creosotebush (Larrea tridentata) has invaded adjacent Bouteloua sp. grasslands. Using imagery collected in 1999 from NASA’s Airborne Visible/Infrared Imaging Spectrometer (AVIRIS), we derived fractional cover estimates for shrubs, grasses, and bare ground across the shrubland and grassland transition. Based on average SOC content from soil samples collected under each cover type and the fractional cover estimates, we calculated SOC stocks across the transition. Similarly, we calculated plant biomass carbon using the fractional cover estimates and allometric relationships between plant biomass carbon and shrub or grass cover. Next, we calculated ecosystem carbon storage across the shrubland and grassland transition by summing SOC stocks and plant biomass carbon. We validated our remote sensing analysis using field measurements of fractional cover in existing research plots. Our results suggest ecosystem carbon storage increases following woody plant encroachment in this system due to increases in SOC and plant biomass carbon associated with shrubs. However, these results are strongly influenced by differences in the relative cover of shrubs, grasses, and bare ground across the shrubland and grassland transition, which suggests landscape structure has a significant effect on ecosystem carbon storage.