Heavy rainfall events are expected to increase in frequency and severity in the future. However, their effects on natural ecosystems are largely unknown, in particular with different seasonal timing of the events and recurrence over multiple years. We conducted a 4 yr manipulative experiment to explore grassland response to heavy rainfall imposed in either the middle of, or late in, the growing season in Inner Mongolia, China. We measured hierarchical responses at individual, community and ecosystem levels. Surprisingly, above‐ground biomass remained stable in the face of heavy rainfall, regardless of seasonal timing, whereas heavy rainfall late in the growing season had consistent negative impacts on below‐ground and total biomass. However, such negative biomass effects were not significant for heavy rainfall in the middle of the growing season. By contrast, heavy rainfall in the middle of the growing season had greater positive effects on ecosystem CO2 exchanges, mainly reflected in the latter 2 yr of the 4 yr experiment. This two‐stage response of CO2 fluxes was regulated by increased community‐level leaf area and leaf‐level photosynthesis and interannual variability of natural precipitation. Overall, our study demonstrates that ecosystem impacts of heavy rainfall events crucially depend on the seasonal timing and multiannual recurrence. Plant physiological and morphological adjustment appeared to improve the capacity of the ecosystem to respond positively to heavy rainfall.