There is concern that species loss may adversely affect ecosystem functioning and stability. But although there is evidence that biodiversity loss can lead to reductions in biomass production, there is no direct evidence that biodiversity loss affects ecosystem resistance (ability to withstand perturbation) or resilience (recovery from perturbation). Yet theory, laboratory experiments and indirect experimental evidence strongly suggest that diversity and stability are related. Here we report results from a field experiment with factorially crossed perturbation and diversity manipulations. We simulated drought perturbation on constructed grassland ecosystems containing 1, 2, 4, 8 or 32 plant species. Under unperturbed conditions, the species-poor systems achieved lower biomass production than the species-rich systems. However, the species-poor systems were more resistant to perturbation than the species-rich systems. The species-poor systems also showed a larger initial resilience following perturbation, although the original relationship between diversity and productivity was fully restored after 1year. Our results confirm that biodiversity increases biomass production, but they also point to the fact that such diversity--production associations may lead to an inverse relationship between biodiversity and the stability of ecosystem functioning.