Soil respiration (Rsoil) is a dominant, but variable, contributor to ecosystem CO2 efflux. Understanding how variations in major environmental drivers, like temperature and available moisture, might regulate Rsoil has become extremely relevant. Plant functional-type diversity makes such assessments difficult because of the confounding influence of varied plant phenology and influences on soil microhabitats. We used automated measurement systems to quantify Rsoil in the three microhabitats (under mesquites, under bunchgrasses, and in intercanopy soils) that result from mesquite encroachment into grasslands to inform our understanding of diel Rsoil patterns in response to changes in temperature, seasonal variations in Rsoil in response to varied soil moisture and plant phenology, and the contribution of each microhabitat to total ecosystem-scale Rsoil. We detected a counterclockwise hysteretic response of Rsoil to soil temperature, such that up to 100% greater fluxes were observed in the afternoon/evening than the morning for the same temperature. Phenological differences influenced ecosystem-scale Rsoil in that mesquites were physiologically active months before bunchgrasses and Rsoil rates under mesquites were greater and elevated longer in response to rains. Cumulative annual Rsoil was 412, 229, and 202 g C m−2 under mesquites, bunchgrasses, and intercanopy spaces, respectively. Extrapolating to the ecosystem-scale using cover estimates within the site's eddy covariance footprint illustrated that average mesquite Rsoil contributed 46% to overall ecosystem-scale Rsoil, though mesquite composed only about 35% of the site. As grasslands transition to shrub dominance, the contribution of Rsoil to net ecosystem flux will likely increase, potentially offsetting presumed greater CO2 uptake potential of woody plants.