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Background and aims: Nutrient addition increases plant aboveground production but causes species richness decline in many herbaceous communities. Asymmetric competition for light and detrimental effects of nitrogen have been shown to cause species richness decline in mesic ecosystems. However, it remains unclear whether and how other limiting factors may also play a role in the decline of species richness, especially in ecosystems where soil water could be more limiting. Methods: We conducted a meta-analysis of > 1600 experiments on nutrient and water addition across grasslands worldwide. Results: We find that nitrogen addition, alone or combined with other nutrients, significantly increases aboveground production but decreases species richness. However, water addition can avoid species loss when nutrients were added, indicating that water is a crucial limiting resource in driving species richness decline under nutrient addition. Overall, water limitation may be the primary driver of species richness decline under nutrient addition in approximately 70% of global grassland areas where mean annual soil water content is ≤ 30%. Therefore, as nutrient availability increases in global grasslands, soil moisture limitation may be responsible for the decline of species richness in regions. Conclusion: Our study quantifies the soil water threshold below which plant species is mainly driven by water limitation, and highlights a novel and widespread mechanism driving species richness decline in global grasslands under nutrient addition.