Drought as an intermittent disturbance of the water cycle interacts with the carbon cycle differently than the ‘gradual’ climate change. During drought plants respond physiologically and structurally to prevent excessive water loss according to species-specific water use strategies. This has consequences for carbon uptake by photosynthesis and release by total ecosystem respiration. After a drought the disturbances in the reservoirs of moisture, organic matter and nutrients in the soil and carbohydrates in plants lead to longer-term effects in plant carbon cycling, and potentially mortality. Direct and carry-over effects, mortality and consequently species competition in response to drought are strongly related to the survival strategies of species. Here we review the state of the art of the understanding of the relation between soil moisture drought and the interactions with the carbon cycle of the terrestrial ecosystems. We argue that plant strategies must be given an adequate role in global vegetation models if the effects of drought on the carbon cycle are to be described in a way that justifies the interacting processes.Research highlights► Intermittent droughts interact differently with the carbon cycle than gradual change. ► Direct effects on carbon exchange depend strongly on vegetation species strategie. ► Drought induced mortality is species sensitive and gives rise to competition. ► Disturbed nutrient and carbohydrate reservoirs cause carry-over effects. ► Models need to simulate these longer-term climate-carbon cycle feedbacks.