Precipitation alteration could profoundly affect the plant community structure and ecosystem function in desert grassland. However, the mechanism of ecological response driven by plant community during extreme changes in precipitation remains unclear. To address this uncertainty, we examined the responses of community composition, diversity and production in slope desert grassland of China to precipitation gradient experiment, which included five precipitation treatment levels (i.e., ambient precipitation as a control [0], +/- 20% and +/- 40% of ambient precipitation [-40%, -20%, +20% and +40%]). The extreme drought treatment (-40%) significantly reduced aboveground biomass (AGB) and plant growth (e.g. height, coverage and density) across three years, with no significant effect of increased precipitation treatments. This reduction in ecosystem function coincided with the reducing trend in productivity of forbs and grasses. The relative abundance of certain dominant species (Ajania fruticulosa) decreased, whereas the relative abundance of other dominant species (Stipa breviflora) increased; however, the reordering of species abundances under the extreme drought treatment was not confirmed. Meanwhile, species diversity did not change with precipitation treatments. Furthermore, species asynchrony was reduced by the extreme drought. Our results suggested that the decrease of ecosystem function indicated by AGB is mainly governed by plant growth and biomass of functional groups rather than community composition and diversity under precipitation alteration in the desert grassland.