Our system spans ecotones from blue grama- to black grama-dominated grassland, and black grama grassland to creosotebush shrubland. Since 1989, SPEI has declined (r=-0.38) at Sevilleta while interannual variance in SPEI has increased (r=0.50). Over time, black grama increased in abundance relative to blue grama, and creosotebush has encroached into black grama grassland, a pattern consistent with increasingly negative (more arid) SPEI. We found significant non-linear responses of grasslands to annual precipitation and temperature, indicative of sensitivity to interannual variance. Essentially, NPP of black grama grassland benefits from increased variance under low SPEI (p=0.019) whereas blue grama NPP declines under increased variance at low SPEI (p=0.0001). Specifically, NPP of black grama grassland benefited from increased precipitation variability during warmer years and did poorly under high variance in cooler years. The opposite pattern occurred for blue grama. Creosotebush shrubland was essentially unresponsive to higher variability or changes in summer temperature. These patterns suggest that warmer temperatures when combined with increased precipitation variability will favor black grama replacement of blue grama grassland, likely paving the way for further shrub encroachment. Our results have important implications for how climate change will drive temporal dynamics and impact the carbon budget of aridland ecosystems.