Abstract. Climate change and the widespread alteration of natural habitats are major drivers of vegetation change in drylands. In the Chihuahuan Desert, large areas of grasslands dominated by perennial grass species have transitioned over the last 150 years to shrublands dominated by woody species, accompanied by accelerated water and wind erosion. Multiple mechanisms drive the shrub-encroachment process, including precipitation variations, land-use change, and soil erosion–vegetation feedbacks. In this study, using a simple ecohydrological modelling framework, we show that herbaceous (grasses and forbs) and shrub vegetation in drylands have different responses to antecedent precipitation due to functional differences in plant-growth and water-use patterns. Therefore, shrub encroachment may be reflected in the analysis of landscape-scale vegetation–rainfall relationships. We analyse the structure and dynamics of vegetation at an 18 km² grassland–shrubland ecotone in the northern edge of the Chihuahuan Desert (McKenzie Flats, Sevilleta National Wildlife Refuge, NM, USA) by investigating the relationship between decade-scale (2000–2013) records of remotely sensed vegetation greenness (MODIS NDVI) and antecedent rainfall. NDVI–rainfall relationships show a high sensitivity to spatial variations on dominant vegetation types across the grassland–shrubland ecotone, and provide biophysical criteria to (a) classify landscape types as a function of the spatial distribution of dominant vegetation and to (b) decompose the NDVI signal into partial components of annual net primary production (ANPP) for herbaceous vegetation and shrubs. Analysis of remotely sensed ANPP dynamics across the study site indicates that plant growth for herbaceous vegetation is particularly synchronized with monsoonal summer rainfall. For shrubs, ANPP is better explained by winter plus summer precipitation, overlapping the monsoonal period (June–September) of rain concentration. Our results suggest that shrub encroachment was not particularly active in this Chihuahuan ecotone for the period 2000–2013. However, future changes in the amount and temporal pattern of precipitation (i.e. reductions in monsoonal summer rainfall and/or increases in winter precipitation) may enhance the shrub-encroachment process, particularly in the face of expected upcoming increases in aridity for desert grasslands of the southwestern USA.