Accelerating rate of species loss has prompted researchers to study the role of species diversity in processes that control ecosystem functioning. Although negative impact of species loss has been documented, the evidence concerning its impact on ecosystem stability is still limited. Here, we studied the effects of declining species and functional diversity on plant community responses to drought in the field (open to weed colonization) and greenhouse conditions. Both species and functional diversity positively affected the average yields of field communities. However, this pattern was similar in both drought-stressed and control plots. No effect of diversity on community resistance, biomass recovery after drought and resilience was found because drought reduced biomass production similarly at each level of diversity by approximately 30%. The use of dissimilarity (characterized by Euclidean distance) revealed higher variation under changing environments (drought-stressed vs. control) in more diverse communities compared to less species-rich assemblages. In the greenhouse experiment, the effect of species diversity affected community resistance, indicating that more diverse communities suffered more from drought than species-poor ones. We conclude that our study did not support the insurance hypothesis (stability properties of a community should increase with species richness) because species diversity had an equivocal effect on ecosystem resistance and resilience in an environment held under non-weeded practice, regardless of the positive relationship between sown species diversity and community biomass production. More species-rich communities were less resistant against drought-stressed conditions than species-poor ones grown in greenhouse conditions.