Dryland ecosystems play a pivotal role in regulating both the trajectory and magnitude of the terrestrial carbon sink. Projections indicate that these regions will experience increasingly frequent and intense water stress. However, large uncertainties remain regarding the responses of carbon and water fluxes to these stresses in temperate semi-arid steppes. Here, we analyzed a decade of measurements (2014-2023) to examine the responses of carbon and water fluxes in the Mu Us Desert steppe ecosystem in northern China under three water stress conditions: dry, heat, and compound dry-heat conditions. Collectively, carbon and water fluxes decreased under water stress conditions, with net ecosystem production (NEP) shifting from a carbon sink of 0.39 +/- 0.03 g C m-2 d-1 to a carbon source ranging from -0.43 to -0.28 g C m-2 d-1. Using an interpretable machine learning algorithm, we found that the responses of carbon and water fluxes to soil water content (SWC) exhibited a threshold effect characterized by a positive pattern. Below these threshold values, SWC's impacts on the fluxes were negative, while exceeding these values resulted in positive effects. Under water stress conditions, both shallow-layer and whole-profile SWC constrained carbon and water fluxes due to their low levels. Similarly, elevated temperature under water stress conditions enhanced ecosystem respiration (Re) and evapotranspiration (ET), partially offsetting the constraints imposed by limited water availability. However, gross ecosystem production (GPP) and NEP exhibited contrasting response patterns to temperature, leading to a greater suppression of GPP and NEP compared to Re and ET under heat and dry-heat conditions. Our findings highlight the importance of the divergent temperature responses of photosynthesis and respiration in controlling the ecosystem carbon sink under water stress conditions. Ongoing climate warming and increasingly frequent water stress may impair the carbon sequestration potential of semi-arid steppes and thus exacerbate their vulnerability.