During the 1930s Dust Bowl drought in the central United States, species with the C3 photosynthetic pathway expanded throughout C4-dominated grasslands. This widespread increase in C3 grasses during a decade of low rainfall and high temperatures is inconsistent with well-known traits of C3 vs. C4 pathways. Indeed, water use efficiency is generally lower, and photosynthesis is more sensitive to high temperatures in C3 than C4 species, consistent with the predominant distribution of C3 grasslands in cooler environments and at higher latitudes globally. We experimentally imposed extreme drought for 4 y in mixed C3/C4 grasslands in Kansas and Wyoming and, similar to Dust Bowl observations, also documented three- to fivefold increases in C3/C4 biomass ratios. To explain these paradoxical responses, we first analyzed long-term climate records to show that under nominal conditions in the central United States, C4 grasses dominate where precipitation and air temperature are strongly related (warmest months are wettest months). In contrast, C3 grasses flourish where precipitation inputs are less strongly coupled to warm temperatures. We then show that during extreme drought years, precipitation–temperature relationships weaken, and the proportion of precipitation falling during cooler months increases. This shift in precipitation seasonality provides a mechanism for C3 grasses to respond positively to multiyear drought, resolving the Dust Bowl paradox. Grasslands are globally important biomes and increasingly vulnerable to direct effects of climate extremes. Our findings highlight how extreme drought can indirectly alter precipitation seasonality and shift ecosystem phenology, affecting function in ways not predictable from key traits of C3 and C4 species.