The increase in atmospheric greenhouse gas concentrations from anthropogenic activities is the major driver of recent global climate change1. The stimulation of plant photosynthesis due to rising atmospheric carbon dioxide concentrations ([CO2]) is widely assumed to increase the net primary productivity (NPP) of C3 plants—the CO2 fertilization effect (CFE)1, 2, 3, 4, 5, 6, 7. However, the magnitude and persistence of the CFE under future climates, including more frequent weather extremes, are controversial1, 2, 3, 8, 9, 10, 11, 12. Here we use data from 16 years of temperate grassland grown under ‘free-air carbon dioxide enrichment’ conditions to show that the CFE on above-ground biomass is strongest under local average environmental conditions. The observed CFE was reduced or disappeared under wetter, drier and/or hotter conditions when the forcing variable exceeded its intermediate regime. This is in contrast to predictions of an increased CO2 fertilization effect under drier and warmer conditions13. Such extreme weather conditions are projected to occur more intensely and frequently under future climate scenarios1. Consequently, current biogeochemical models might overestimate the future NPP sink capacity of temperate C3 grasslands and hence underestimate future atmospheric [CO2] increase.