Understanding the interactive effects of species invasions and climate change is essential for predicting future shifts in biodiversity. Because multiple stressors can interact in synergistic or antagonistic ways, it is notoriously difficult to anticipate their combined effects on species assemblages. However, some hypotheses predict that plant invasions will become increasingly problematic as climate change improves conditions for invaders or lowers the biotic resistance of native communities. In a four-year field experiment, we quantified the individual and interactive effects of invasion by a globally problematic C4 grass, Imperata cylindrica, and chronic simulated drought imposed by rainout shelters on the whole plant communities of regenerating longleaf pine forest. Invasion both inhibited plant colonization and enhanced plot-level extinctions, resulting in a severe (60%) loss of plant diversity across all functional groups, including perennial grasses and forbs, annual forbs, and woody species and dramatic shifts in community composition. Experimental drought reduced diversity by 20%, and caused a shift in the dominant functional groups, but had no significant effect on cover of the invader. The invader partially ameliorated water stress in the drought treatment such that invaded plots had higher soil moisture than uninvaded plots. Consequently, the combined effects of invasion and drought were lower than expected from an additive model of multiple stressors. These findings, which may have broader implications for how other C4 grass invaders will interact with drought to shift native community dynamics, challenge the perception that climate change will exacerbate invasions. In revealing that invasive species pose a major threat to the diversity and structure of native communities despite their moderating effects on abiotic stress, this work also highlights that management of aggressive invaders may be critical to preserving biodiversity regardless of future climate.