Extreme drought events and plant invasions are major drivers of global change that can critically affect ecosystem functioning and alter ecosystem-atmosphere exchange. Invaders are expanding worldwide and extreme drought events are projected to increase in frequency and intensity. However, very little is known on how these drivers may interact to affect the functioning and resilience of ecosystems to extreme events. Using a manipulative shrub removal experiment and the co-occurrence of an extreme drought event (2011/2012) in a Mediterranean woodland, we show that native shrub invasion and extreme drought synergistically reduced ecosystem transpiration and the resilience of key-stone oak tree species. Ecosystem transpiration was dominated by the water use of the invasive shrub Cistus ladanifer, which further increased after the extreme drought event. Meanwhile, the transpiration of key-stone tree species decreased, indicating a competitive advantage in favour of the invader. Our results suggest that in Mediterranean-type climates the invasion of water spending species and projected recurrent extreme drought events may synergistically cause critical drought tolerance thresholds of key-stone tree species to be surpassed, corroborating observed higher tree mortality in the invaded ecosystems. Ultimately, this may shift seasonally water limited ecosystems into less desirable alternative states dominated by water spending invasive shrubs.