Drought has well-documented societal and economic consequences. Climate change is expected to intensify drought to even more extreme levels, but because such droughts have been historically rare, their impact on ecosystem functioning is not well known. We experimentally imposed the most frequent type of intensified drought—one that is ~1 y in duration—at 100 grassland and shrubland sites distributed across six continents. We found that loss of aboveground plant growth, a key measure of ecosystem function, was 60% greater when short-term drought was extreme (≤1-in-100-y historical occurrence). This drought-induced loss in function greatly exceeds previously reported losses for grasslands and shrublands, suggesting that the global impacts of projected increases in drought severity have been substantially underestimated.