Arid and semiarid ecosystems drive year-to-year variability in the strength of the terrestrial carbon (C) sink, yet there is uncertainty about how soil C gains and losses contribute to this variation. To address this knowledge gap, we embedded C-depleted soil mesocosms, containing litter or biocrust C inputs, within an in situ dryland ecosystem warming experiment. Over the course of one year, changes in microbial biomass and total soil organic C pools were monitored alongside hourly measurements of soil CO₂ flux. We also developed a biogeochemical model to explore the mechanisms that gave rise to observed soil C dynamics. Field data and model simulations demonstrated that water exerted much stronger control on soil biogeochemistry than temperature, with precipitation events triggering large CO₂ pulses and transport of litter- and biocrust-derived C into the soil profile. We expected leaching of organic matter would result in steady accumulation of C within the mineral soil over time. Instead, the size of the total organic C pool fluctuated throughout the year, largely in response to microbial growth: increases in the size of microbial biomass were negatively correlated with the quantity of C residing in the top 2 cm, where most biogeochemical changes were observed. Our data and models suggest that microbial responses to precipitation events trigger rapid metabolism of dissolved organic C inputs, which strongly limit accumulation of autotroph-derived C belowground. Accordingly, changes in the magnitude and/or frequency of precipitation events in this dryland ecosystem could have profound impacts on the strength of the soil C sink.