Soils are the largest terrestrial carbon (C) pool on the planet, and targeted grassland management has the potential to increase grassland C sequestration. Appropriate land management strategies, such as organic matter addition, can increase soil C stocks and improve grasslands' resilience to drought by improving soil water retention and infiltration. However, soil carbon dynamics are closely tied to vegetation responses to management and climatic changes, which affect roots and shoots differently. This study presents findings from a 3-year field experiment on two Swedish grasslands that assessed the impact of compost amendment and experimental drought on plant biomass and soil C to a depth of 45 cm. Aboveground biomass and soil C content (% C) increased compared with untreated controls in compost-amended plots; however, because bulk density decreased, there was no significant effect on soil C stocks. Experimental drought did not significantly reduce plant biomass compared to control plots, but it stunted the increase in aboveground biomass in compost-treated plots and led to changes in root traits. These results highlight the complexity of ecosystem C dynamics and the importance of considering multiple biotic and abiotic factors across spatial scales when developing land management strategies to enhance C sequestration.