Climate change may affect ecosystem functioning through increased temperatures or changes in precipitation patterns. Temperature and water availability are important drivers for ecosystem processes such as photosynthesis, carbon translocation, and organic matter decomposition. These climate changes may affect the supply of carbon and energy to the soil microbial population and subsequently alter decomposition and mineralization, important ecosystem processes in carbon and nutrient cycling. In this study, carried out within the cross-European research project CLIMOOR, the effect of climate change, resulting from imposed manipulations, on carbon dynamics in shrubland ecosystems was examined. We performed a C-14-labeling experiment to probe changes in net carbon uptake and allocation to the roots and soil compartments as affected by a higher temperature during, the year and a drought period in the growing season. Differences in climate, soil, and plant characteristics resulted in a gradient in the severity of the drought effects on net carbon uptake by plants with the impact being most severe in Spain, followed by Denmark, with the UK showing few negative effects at significance levels of p less than or equal to 0.10. Drought clearly reduced carbon flow from the roots to the soil compartments. The fraction of the C-14 fixed by the plants and allocated into the soluble carbon fraction in the soil and to soil microbial biomass in Denmark and the UK decreased by more than 60%. The effects of warming were not significant, but, as with the drought treatment, a negative effect on carbon allocation to soil microbial biomass was found. The changes in carbon allocation to soil microbial biomass at the northern sites in this study indicate that soil microbial biomass is a sensitive, early indicator of drought- or temperature-initiated changes in these shrubland ecosystems. The reduced supply of substrate to the soil and the response of the soil microbial biomass may help to explain the observed acclimation of CO2 exchange in other ecosystems.