Land-use change and intensification play a key role in the current biodiversity crisis. The resulting species loss can have severe effects on ecosystem functions and services, thereby increasing ecosystem vulnerability to climate change. We explored whether land-use intensification (i.e. fertilization intensity), plant diversity and other potentially confounding environmental factors may be significantly related to water use (i.e. drought stress) of grassland plants. Drought stress was assessed using δ13C abundances in aboveground plant biomass of 150 grassland plots across a gradient of land-use intensity. Under water shortage, plants are forced to increasingly take up the heavier 13C due to closing stomata leading to an enrichment of 13C in biomass. Plants were sampled at the community level and for single species, which belong to three different functional groups (one grass, one herb, two legumes). Results show that plant diversity was significantly related to the δ13C signal in community, grass and legume biomass indicating that drought stress was lower under higher diversity, although this relation was not significant for the herb species under study. Fertilization, in turn, mostly increased drought stress as indicated by more positive δ13C values. This effect was mostly indirect by decreasing plant diversity. In line with these results, we found similar patterns in the δ13C signal of the organic matter in the topsoil, indicating a long history of these processes. Our study provided strong indication for a positive biodiversity-ecosystem functioning relationship with reduced drought stress at higher plant diversity. However, it also underlined a negative reinforcing situation: as land-use intensification decreases plant diversity in grasslands, this might subsequently increases drought sensitivity. Vice-versa, enhancing plant diversity in species-poor agricultural grasslands may moderate negative effects of future climate change.