Many regions across the globe are shifting to more arid climates. For shallow lakes, decreasing rainfall volume and timing, changing regional wind patterns and increased evaporation rates alter water regimes so that dry periods occur more frequently and for longer. Drier conditions may affect fauna directly and indirectly through altered physicochemical conditions in lakes. Although many studies have predicted negative effects of such changes on aquatic biodiversity, empirical studies demonstrating these effects are rare. Global warming has caused severe climatic drying in southwestern Australia since the 1970s, so we aimed to determine whether lakes in this region showed impacts on lake hydroperiod, water quality, and α, β and γ diversity of lake invertebrates from 1998 to 2011. Seventeen lakes across a range of salinities were sampled biennially in spring in the Wheatbelt and Great Southern regions of Western Australia. Multivariate analyses were used to identify changes in α, β and γ diversity and examine patterns in physicochemical data. Salinity and average rainfall partially explained patterns in invertebrate richness and assemblage composition. Climatic drying was associated with significant declines in lake depth, increased frequency of dry periods, and reduced α and γ diversity (γ declined from ~300 to ~100 taxa from 1998 to 2011 in the 17 wetlands). In contrast, β diversity remained consistently high, because each lake retained a distinct fauna. Mean α diversity per-lake declined both in lakes that dried and lakes that did not dry out, but lakes which retained a greater proportion of their maximum depth retained more α diversity. Accumulated losses in α diversity caused the decline in γ diversity likely through shrinking habitat area, fewer stepping stones for dispersal and loss of specific habitat types. Biodiversity loss is thus likely from lakes in drying regions globally. Management actions will need to sustain water depth in lakes to prevent biodiversity loss.