An unprecedented era of climatic volatility is altering ecosystems across our planet1. The potential scale, pace and consequences of this global change have been modelled extensively2, yet little empirical research has quantified the impacts of extreme climate events on the composition of contemporary ecological communities. Here, we quantified the responses of 423 sympatric species of plants, arthropods, birds, reptiles and mammals to California’s drought of 2012–2015—the driest period in the past 1,200 years3 for this global biodiversity hotspot. Plants were most responsive to one-year water deficits, whereas vertebrates responded to longer-term deficits, and extended drought had the greatest impact on carnivorous animals. Locally rare species were more likely to increase in numbers and abundant species were more likely to decline in response to drought, and this negative density dependence was remarkably consistent across taxa and drought durations. Our system-wide analysis reveals that droughts indirectly promote the long-term persistence of rare species by stressing dominant species throughout the food web. These findings highlight processes that shape community structure in highly variable environments and provide insights into whole-community responses to modern climate volatility.