Global warming has resulted in increases in the intensity, frequency, and duration of drought in most land areas at the regional and global scales. Nevertheless, comprehensive understanding of how water use efficiency (WUE), gross primary production (GPP), and actual evapotranspiration (AET)-induced water losses respond to exceptional drought and whether the responses are influenced by drought severity (DS) is still limited. Herein, we assess the fluctuation in the standardized precipitation evapotranspiration index (SPEI) over the Middle East from 1982 to 2017 to detect the drought events and further examine standardized anomalies of GPP, WUE, and AET responses to multiyear exceptional droughts, which are separated into five groups designed to characterize the severity of extreme drought. The intensification of the five drought events (based on its DS) increased the WUE, decreased the GPP and AET from D5 to D1, where both the positive and negative variance among the DS group was statistically significant. The results showed that the positive values of standardized WUE with the corresponding values of the negative GPP and AET were dominant (44.3% of the study area), where the AET values decreased more than the GPP, and the WUE fluctuation in this region is mostly controlled by physical processes, i.e., evaporation. Drought’s consequences on ecosystem carbon-water interactions ranged significantly among eco-system types due to the unique hydrothermal conditions of each biome. Our study indicates that forthcoming droughts, along with heightened climate variability, pose increased risks to semi-arid and sub-humid ecosystems, potentially leading to biome restructuring, starting with low-productivity, water-sensitive grasslands. Our assessment of WUE enhances understanding of water-carbon cycle linkages and aids in projecting ecosystem responses to climate change.