Soil carbon is a critical ecosystem function in drylands. In these ecosystems, positive relationships between plant species richness (SR) and soil carbon storage (SOC) that have been found in biodiversity experiments and observational studies may be reduced by grazing and aridity. However, studies about the extent to which SR, grazing intensity, and aridity are interactively and directly or indirectly related with SOC so far provided mixed results. Using a network of 199 grassland sites across a large aridity gradient in western China, selected to represent low, medium, and high grazing intensity, we found that SOC at the depth of 0–30 cm was positively related with SR and, to a lesser degree, with grazing intensity. Aridity had no direct relationship with SOC but affected it indirectly and negatively via its negative relationships with both SR and grazing intensity and via its positive relationship with soil pH. There were no indications that grazing intensity could modify the positive SR–SOC relationship, possibly because very high grazing intensities did not occur in the study region. We conclude that current levels of SR and grazing intensity should be maintained to avoid SOC-loss and CO2 release form grassland under predicted aridity increases in the study region.