Species interactions in invaded ecosystems are important to understand for predicting future changes in the system and are particularly crucial in the context of global climate change and increasing climate variability. Southern California's predominately shrub dominated ecosystems are being invaded by exotic annual species and are predicted to experience increasingly severe drought. It remains unclear how these shifts in species composition combined with inter-annual climate variability may leave a legacy that affects ecosystem functioning beyond the duration of the disturbance. In this dissertation, I tested the hypothesis that invasion can alter ecosystem function and recovery from drought. Chapter 1 shows that traits rather than fitness differences are most important when predicting competitive outcomes between native and exotic focal species. I found that different combinations of traits may aid in determining which species are most likely to strongly compete with invaders versus those that will be competitively suppressed by invaders. This demonstrates the complexity of the interactions between the native and exotic species in their immediate interactions. Chapter 2 scales up to see how these competitive interactions play out at the ecosystem level in a natural system. I found that native biomass was more resistant to changes in response to drought but that exotic biomass was more resilient in returning to pre-drought abundances in its recovery from drought. The greater decline in exotic biomass with drought was likely driven by life-history differences between native and exotic species in this system, where exotic species are more likely to have an annual life history, and native species are more likely to be perennial. This chapter demonstrated that when exotic and native species differ in life history they may also vary in their resistance and resiliency in response to climate extremes such as drought. Chapter 3 documents how the shifting species composition observed in chapter 2 influenced ecosystem functioning during recovery from drought, particularly with regard to phenology. I found that the most severe drought plots exhibited higher abundances of species with longer blooming phenology duration and ecosystem level shift towards later phenology. I showed that drought can leave a multi-year legacy on these communities that continues once the disturbance has ended. In sum this dissertation shows that invasion alters ecosystem recovery from severe drought as measured by productivity, biomass, and ecosystem level phenology and indicates the importance of evaluating the impact of a disturbance even once recovery has begun.