Shrub encroachment is a common ecological state transition in global drylands and has myriad adverse effects on grasslands and the services they provide. This physiognomic shift is often ascribed to changes in climate (e.g. precipitation) and disturbance regimes (e.g. grazing and fire), but this remains debated. Aeolian processes are known to impact resource distribution in drylands, but their potential role in grassland-to-shrubland state changes has received little attention. We quantified the effects of 'sandblasting' (abrasive damage by wind-blown soil) on the ecophysiology of dryland grass vs shrub functional types using a portable wind tunnel to test the hypothesis that grasses would be more susceptible to sandblasting than shrubs and, thus, reinforce transitions to shrub dominance in wind-erodible grasslands when climate-or disturbance-induced reductions in ground cover occur. Grasses and shrubs responded differently to sandblasting, wherein water-use efficiency declined substantially in grasses, but only slightly in shrubs, owing to grasses having greater increases in day/nighttime leaf conductance and transpiration. The differential ecophysiological response to sandblasting exhibited by grass and shrub functional types could consequently alter the vegetation dynamics in dryland grasslands in favour of the xerophytic shrubs. Sandblasting could thus be an overlooked driver of shrub encroachment in wind-erodible grasslands.