Woody plant encroachment in arid grasslands may reduce plant uptake and soil storage of carbon (C) with consequences for the global C cycle, yet multi-site comparative studies have not been done so far and experiments are not feasible due to the long time needed for soil organic C (SOC) to accumulate. We selected multiple grassland sites with ≥50 % or 0 % woody plant aboveground biomass in each of six vegetation types representing a gradient of increasing aridity, resulting in a comparative study design with a total of 178 pure and 106 wooded grasslands distributed over the large geographic area of Xinjiang, China. Differences between wooded and pure grasslands in SOC stocks in the top 100 cm of the soil changed from positive to negative with increasing aridity. This effect was strongest in the upper soil layers, suggesting that woody plants had perhaps not been present for long enough to leave a signal in the lower soil layers. The differences in SOC stocks were related to differences in plant belowground standing C (BGC) and these to differences in yearly plant aboveground C uptake (ANPP) between wooded and pure grasslands. At more arid sites, wooded grasslands had lower ANPP and BGC because of reduced contributions of herbaceous plants that were not fully compensated by woody plants. Considering predicted increases in aridity in the study region, our results suggest that to avoid future losses of grassland SOC stocks - which are several ten times higher than the C stored in plant organs - management should try to prevent or reduce woody plant encroachment.