Dryland ecosystems are expected to expand globally as a result of rising atmospheric water demand and vapor pressure deficit. However, the nature and magnitude of how water-limited ecosystems are adapting to increases in aridity is unclear. Here we examine changes in ecosystem water use efficiency (WUE), defined as the ratio of gross primary productivity (GPP) to evapotranspiration (ET), in global water-limited regions over the past two decades. Our analysis uses remotely sensed data, process-based models, and reanalysis datasets to quantify changes in WUE and examine the role that changes in atmospheric CO2, atmospheric water demand, and soil moisture exert on WUE dynamics in water-limited ecosystems. Our results show that on average WUE increased by 17% in water-limited regions worldwide. Asia, North America, and Africa showed the largest increases in WUE (24%, 17%, and 17%, respectively), followed by Europe, South America, and Oceania (15%, 10%, and 9%, respectively). Ecosystems with low mean annual WUE showed the largest increases of WUE. CO2 fertilization from increasing atmospheric CO2 concentrations was the dominant driver behind observed changes in WUE, especially in the Northern Hemisphere. Our findings indicate that vegetation in water-limited ecosystems is adapting to climate change by optimizing water use efficiency but also suggest that the ability of many ecosystems to adapt may decrease as they become drier.