AbstractPhotosynthesis and soil respiration represent the two largest fluxes of CO₂ in terrestrial ecosystems and are tightly linked through belowground carbon (C) allocation. Drought has been suggested to impact the allocation of recently assimilated C to soil respiration; however, it is largely unknown how drought effects are altered by a future warmer climate under elevated atmospheric CO₂ (eT_eCO₂). In a multifactor experiment on managed C3 grassland, we studied the individual and interactive effects of drought and eT_eCO₂ (drought, eT_eCO₂, drought × eT_eCO₂) on ecosystem C dynamics. We performed two in situ ¹³CO₂ pulse‐labeling campaigns to trace the fate of recent C during peak drought and recovery. eT_eCO₂ increased soil respiration and the fraction of recently assimilated C in soil respiration. During drought, plant C uptake was reduced by c. 50% in both ambient and eT_eCO₂ conditions. Soil respiration and the amount and proportion of ¹³C respired from soil were reduced (by 32%, 70% and 30%, respectively), the effect being more pronounced under eT_eCO₂ (50%, 84%, 70%). Under drought, the diel coupling of photosynthesis and SR persisted only in the eT_eCO₂ scenario, likely caused by dynamic shifts in the use of freshly assimilated C between storage and respiration. Drought did not affect the fraction of recent C remaining in plant biomass under ambient and eT_eCO₂, but reduced the small fraction remaining in soil under eT_eCO₂. After rewetting, C uptake and the proportion of recent C in soil respiration recovered more rapidly under eT_eCO₂ compared to ambient conditions. Overall, our findings suggest that in a warmer climate under elevated CO₂ drought effects on the fate of recent C will be amplified and the coupling of photosynthesis and soil respiration will be sustained. To predict the future dynamics of terrestrial C cycling, such interactive effects of multiple global change factors should be considered.