Technical Abstract: Drought is one of the most devastating natural hazards faced by the Southern United States (SUS) today. Although precipitation in the SUS as a whole has been found to increase during 1895-2007, drought events and their adverse impacts on the economy, society and environment have been extensively reported. Our aim is thus to characterize drought conditions in the SUS and explore drought impacts on terrestrial ecosystem function (i.e., net primary productivity (NPP) and net carbon exchange (NCE)). The standard precipitation index (SPI) was used to characterize drought intensity and duration in the SUS and a process-based Dynamic Land Ecosystem Model (DLEM) was used to explore the relationship between drought and terrestrial ecosystem function. Percent drought area (%) and drought duration (months.yr-1) exhibited no significant change (P < 0.05) during 1895-2007. Combining the overall information of growing-season SPI, drought area, and duration, we concluded there was no obvious evidence of a significant change in drought condition for the SUS as a whole over 1895-2007. However, increased drought intensity was found for many areas in the eastern SUS and the coastal region of Gulf of Mexico. NPP decreased significantly for large areas in the east, whereas increasing in the west. NPP was noted to decrease up to 40% in some areas during extreme droughts. Changes in precipitation patterns caused C emissions of 0.16 Pg in the SUS during 1895-2007. The western SUS (dry region) was found to act as a C sink due to increased precipitation, while the east (water-rich region) acted as a C source due to increased drought intensity. These findings suggested that precipitation change could greatly increase C sequestration in the drier regions of the SUS. Both NPP and NCE significantly increased along a gradient of declining drought intensity. Changes in precipitation caused a C source in forest, wetland, and cropland ecosystems, while a C sink in shrubland and grassland ecosystems. Changes in air temperature could either enhance or reduce drought impacts on NPP and NCE for different vegetation types. Although drought intensity and frequency were not found to significantly change for the entire SUS during 1895-2007, changed precipitation patterns still resulted in significant decreases in regional NPP and carbon storage due to the large spatial variations and inter-annual variability in drought conditions. More experimental evidence is needed for the further improvement of ecosystem models to adequately simulate complex interactive processes among multiple environmental factors.