A growing body of evidence highlights the importance of biodiversity for ecosystem stability and the maintenance of optimal ecosystem functionality. Conservation measures are thus essential to safeguard the ecosystem services that biodiversity provides and human society needs. Current anthropogenic threats may lead to detrimental (and perhaps irreversible) ecosystem degradation, providing strong motivation to evaluate the response of ecological communities to various anthropogenic pressures. In particular, ecosystem functions that sustain key ecosystem services should be identified and prioritized for conservation action. Traditional diversity measures (e.g. ‘species richness’) may not adequately capture the aspects of biodiversity most relevant to ecosystem stability and functionality, but several new concepts may be more appropriate. These include ‘response diversity’, describing the variation of responses to environmental change among species of a particular community. Response diversity may also be a key determinant of ecosystem resilience in the face of anthropogenic pressures and environmental uncertainty. However, current understanding of response diversity is poor, and we see an urgent need to disentangle the conceptual strands that pervade studies of the relationship between biodiversity and ecosystem functioning. Our review clarifies the links between response diversity and the maintenance of ecosystem functionality by focusing on the insurance hypothesis of biodiversity and the concept of functional redundancy. We provide a conceptual model to describe how loss of response diversity may cause ecosystem degradation through decreased ecosystem resilience. We explicitly explain how response diversity contributes to functional compensation and to spatio-temporal complementarity among species, leading to long-term maintenance of ecosystem multifunctionality. Recent quantitative studies suggest that traditional diversity measures may often be uncoupled from measures (such as response diversity) that may be more effective proxies for ecosystem stability and resilience. Certain conclusions and recommendations of earlier studies using these traditional measures as indicators of ecosystem resilience thus may be suspect. We believe that functional ecology perspectives incorporating the effects and responses of diversity are essential for development of management strategies to safeguard (and restore) optimal ecosystem functionality (especially multifunctionality). Our review highlights these issues and we envision our work generating debate around the relationship between biodiversity and ecosystem functionality, and leading to improved conservation priorities and biodiversity management practices that maximize ecosystem resilience in the face of uncertain environmental change.