© 2016 Bouskill, Wood, Baran, Hao, Ye, Bowen, Lim, Nico, Holman, Gilbert, Silver, Northen and Brodie. Climate model projections for tropical regions show clear perturbation of precipitation patterns leading to increased frequency and severity of drought in some regions. Previous work has shown declining soil moisture to be a strong driver of changes in microbial trait distribution, however, the feedback of any shift in functional potential on ecosystem properties related to carbon cycling are poorly understood. Here we show that drought-induced changes in microbial functional diversity and activity shape, and are in turn shaped by, the composition of dissolved and soil-associated carbon. We also demonstrate that a shift in microbial functional traits that favor the production of hygroscopic compounds alter the efflux of carbon dioxide following soil rewetting. Under drought the composition of the dissolved organic carbon pool changed in a manner consistent with a microbial metabolic response. We hypothesize that this microbial ecophysiological response to changing soil moisture elevates the intracellular carbon demand stimulating extracellular enzyme production, that prompts the observed decline in more complex carbon compounds (e.g., cellulose and lignin). Furthermore, a metabolic response to drought appeared to condition (biologically and physically) the soil, notably through the production of polysaccharides, particularly in experimental plots that had been pre-exposed to a short-term drought. This hysteretic response, in addition to an observed drought-related decline in phosphorus concentration, may have been responsible for a comparatively modest CO2efflux following wet-up in drought plots relative to control plots.