Vegetation feedbacks to ecosystem processes represent a major source of uncertainty in climate change scenarios. In Southern California’s historically shrub-dominated ecosystems, increasing drought severity and invasions by exotic species represent two major consequences of global change, but it is unclear how they interact to influence ecosystem processes. In this dissertation, I tested the hypothesis that invasion can alter ecosystem response to drought. Chapter 1 shows that drought reduces ecosystem capacity for carbon gain, especially in areas with invaded vegetation. Invasion increased the phenological sensitivity of green-up and senescence dates and shortened the growing season in response to drought. This demonstrates that invasion can influence ecosystem responses to climate change when native and invading species differ in phenological sensitivity to environmental cues. Chapter 2 moves belowground and shows in a laboratory experiment that soil moisture limits microbial respiration and extracellular enzyme activity. Exotic litter stimulated microbial activity more than native litter, but only under high soil moisture. This suggests that invasion can increase microbial activity in soil, an effect most apparent in high rainfall years. Chapter 3 relates these findings to litter decomposition. Within a field experiment, invasion increased above-ground litter decomposition sensitivity to drought via two mechanisms: 1) increased litter quality, and 2) reduced canopy density allowing for greater photodegradation of the litter layer. Below-ground, drought limited root decomposition rates by restricting microbial activity. These results demonstrate that litter quality, litter position, site aridity, and exposure to photodegradation interact to control litter decomposition rates. Chapter 4 evaluates potential shifts in the relative role of biotic and abiotic decomposition processes and shows that ultraviolet (UV) radiation differentially affects mass loss depending on litter identity. This chapter indicates that UV radiation influence on litter decomposition is less generalizable across species than originally proposed and suggests that the influence of abiotic decomposition depends more on canopy architecture and other microclimate influences than site aridity. In sum, this dissertation shows that invasion strongly alters ecosystem response to drought, as measured through productivity, decomposition, and microbial functionality, and indicates that predictions of ecosystem response to future climate change should account for invasive species’ projected spread.