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Theory relating species richness to ecosystem variability typically ignores the potential for environmental variability to promote species coexistence. Failure to account for fluctuation-dependent coexistence may explain deviations from the expected negative diversity–ecosystem variability relationship, and limits our ability to predict the consequences of increases in environmental variability. We use a consumer-resource model to explore how coexistence via the temporal storage effect and relative nonlinearity affects ecosystem variability. We show that a positive, rather than negative, diversity–ecosystem variability relationship is possible when ecosystem function is sampled across a natural gradient in environmental variability and diversity. We also show how fluctuation-dependent coexistence can buffer ecosystem functioning against increasing environmental variability by promoting species richness and portfolio effects. Our work provides a general explanation for variation in observed diversity–ecosystem variability relationships and highlights the importance of conserving regional species pools to help buffer ecosystems against predicted increases in environmental variability.