Biological soil crusts (biocrusts) are an integral part of the soil system in arid regions worldwide, stabilizing soil surfaces, aiding vascular plant establishment, and are significant sources of ecosystem nitrogen and carbon. Hydration and temperature primarily control ecosystem CO2 flux in these systems. Using constructed mesocosms for incubations under controlled laboratory conditions, we examined the effect of temperature (5–35 °C) and water content (WC, 20–100%) on CO2 exchange in light (cyanobacterially dominated) and dark (cyanobacteria/lichen and moss dominated) biocrusts of the cool Colorado Plateau Desert in Utah and the hot Chihuahuan Desert in New Mexico. In light crusts from both Utah and New Mexico, net photosynthesis was highest at temperatures >30 °C. Net photosynthesis in light crusts from Utah was relatively insensitive to changes in soil moisture. In contrast, light crusts from New Mexico tended to exhibit higher rates of net photosynthesis at higher soil moisture. Dark crusts originating from both sites exhibited the greatest net photosynthesis at intermediate soil water content (40–60%). Declines in net photosynthesis were observed in dark crusts with crusts from Utah showing declines at temperatures >25 °C and those originating from New Mexico showing declines at temperatures >35 °C. Maximum net photosynthesis in all crust types from all locations were strongly influenced by offsets in the optimal temperature and water content for gross photosynthesis compared with dark respiration. Gross photosynthesis tended to be maximized at some intermediate value of temperature and water content and dark respiration tended to increase linearly. The results of this study suggest biocrusts are capable of CO2 exchange under a wide range of conditions. However, significant changes in the magnitude of this exchange should be expected for the temperature and precipitation changes suggested by current climate models.