Biological soil crusts (biocrusts) are critical components of arid and semi-arid ecosystems that contribute significantly to carbon (C) and nitrogen (N) fixation, water retention, soil stability, and seedling recruitment. While dry-land ecosystems face a number of environmental changes, our understanding of how biocrusts may respond to such perturbation remains notably poor. To determine the effect that elevated CO₂ may have on biocrust composition, cover, and function, we measured percent soil surface cover, effective quantum yield, and pigment concentrations of naturally occurring biocrusts growing in ambient and elevated CO₂ at the desert study site in Nevada, USA, from spring 2005 through spring 2007. During the experiment, a year-long drought allowed us to explore the interacting effects that elevated CO₂ and water availability may have on biocrust cover and function. We found that, regardless of CO₂ treatment, precipitation was the major regulator of biocrust cover. Drought reduced moss and lichen cover to near-zero in both ambient and elevated CO₂ plots, suggesting that elevated CO₂ did not alleviate water stress or increase C fixation to levels sufficient to mitigate drought-induced reduction in cover. In line with this result, lichen quantum yield and soil cyanobacteria pigment concentrations appeared more strongly dependent upon recent precipitation than CO₂ treatment, although we did find evidence that, when hydrated, elevated CO₂ increased lichen C fixation potential. Thus, an increase in atmospheric CO₂ may only benefit biocrusts if overall climate patterns shift to create a wetter soil environment.