Exotic plant invasions alter ecosystem properties and threaten ecosystem functions globally. Interannual climate variability (ICV) influences both plant community composition (PCC) and soil properties, and interactions between ICV and PCC may influence nitrogen (N) and carbon (C) pools. We asked how ICV and non-native annual grass invasion covary to influence soil and plant N and C in a semiarid shrubland undergoing widespread ecosystem transformation due to invasions and altered fire regimes. We sampled four progressive stages of annual grass invasion at 20 sites across a large (25,000 km²) landscape for plant community composition, plant tissue N and C, and soil total N and C in 2013 and 2016, which followed two years of dry and two years of wet conditions, respectively. Multivariate analyses and ANOVAs showed that in invasion stages where native shrub and perennial grass and forb communities were replaced by annual grass-dominated communities, the ecosystem lost more soil N and C in wet years. Path analysis showed that high water availability led to higher herbaceous cover in all invasion stages. In stages with native shrubs and perennial grasses, higher perennial grass cover was associated with increased soil C and N, while in annual-dominated stages, higher annual grass cover was associated with losses of soil C and N. Also, soil total C and C:N ratios were more homogenous in annual-dominated invasion stages as indicated by within-site standard deviations. Loss of native shrubs and perennial grasses and forbs coupled with annual grass invasion may lead to long-term declines in soil N and C and hamper restoration efforts. Restoration strategies that use innovative techniques and novel species to address increasing temperatures and ICV and emphasize maintaining plant community structure – shrubs, grasses, and forbs – will allow sagebrush ecosystems to maintain C sequestration, soil fertility and soil heterogeneity.