Grasslands are critical components in global drylands, yet they face threats of increasing aridity and overgrazing under global change. A diverse group of plants and soil microbes are known to enhance grassland resilience and maintain multiple ecosystem functions (multifunctionality) to face these threats. However, it is not clear under which levels of aridity and grazing intensity, plant and microbial diversity most effectively promote multiple ecosystem functions. Here, we surveyed 91 sites across the arid and semiarid natural grasslands in Xinjiang to assess the relative importance of plant and microbial diversity to regulate ecosystem functions, as well as tradeoffs and synergies among ecosystem functions, and to examine how these relationships are mediated by aridity and grazing intensity. We found that the positive relationship between plant diversity and multifunctionality was stronger in arid than in semiarid regions. In arid regions, multifunctionality and synergies among ecosystem functions were positively correlated with plant diversity under low and moderate grazing intensity and negatively related to microbial diversity under high grazing intensity. Overall, increasing plant and microbial diversity generally reduced the trade-offs between pair-ecosystem functions in arid regions. Moreover, aridity reduced synergies among ecosystem functions by increasing soil pH in arid regions, whereas grazing reduced synergies among ecosystem functions by increasing soil clay content in semiarid regions. Together, our results indicate that conserving plant diversity is essential for maintaining synergies among ecosystem functions under low and moderate grazing intensity, while reducing soil disturbance and restoring soil physical properties (e.g., through retaining plant residues and promoting litter accumulation) to promote microbial diversity and activities is of high priority under high grazing intensity. Moreover, a predicted drier climate will further weaken synergies among ecosystem functions. Improving soil physical conditions through reducing grazing intensity and retention of plant residues may buffer these negative effects of aridity and enhance the resilience and sustainability of grasslands in semiard and arid regions.