Understanding how fungal communities are affected by precipitation is an essential aspect of predicting soil functional responses to future climate change and the consequences of those responses for the soil carbon cycle. We tracked fungal abundance, fungal community composition, and soil carbon across 4 years in long-term field manipulations of rainfall in northern California. Fungi responded directly to rainfall levels, with more abundant, diverse, and consistent communities predominating under drought conditions, and less abundant, less diverse, and more variable communities emerging during wetter periods and in rain-addition treatments. Soil carbon storage itself did not vary with rainfall amendments, but increased decomposition rates foreshadow longer-term losses of soil carbon under conditions of extended seasonal rainfall. The repeated recovery of fungal diversity and abundance during periodic drought events suggests that species with a wide range of environmental tolerances coexist in this community, consistent with a storage effect in soil fungi. Increased diversity during dry periods further suggests that drought stress moderates competition among fungal taxa. Based on the responses observed here, we suggest that there may be a relationship between the timescale at which soil microbial communities experience natural environmental fluctuations and their ability to respond to future environmental change.