Climate change will result in an increase in the variability of precipitation within and among years as a result of different atmospheric phenomena. For many locations, there will be larger precipitation events interspersed with longer periods of droughts within a year, and more sequences of extreme dry years followed by multi-year extremely wet periods. Here, we focused on the inter-annual scale and hypothesize that increased inter-annual variability in precipitation will differentially affect the major components of water loss from arid to subhumid ecosystems. We expect this variability will have consequences for the amount of water available to plants for primary production. We tested our hypothesis using the model SOILWAT parameterized for arid (Jornada Basin) and mesic (Konza Prairie) grassland sites in the US. SOILWAT is a multi-layer, daily time-step model that simulates soil water content by depth in the soil profile. We increased precipitation variability at the inter-annual scale by randomly adding or subtracting a percentage of daily precipitation for each year in the 100-year record. Thus, total precipitation was the same as the control simulations, but the variability was 25% higher. We repeated the exercise for 25, 50, 75, and 100% increased variability. Our results show that increased interannual precipitation variability increased plant available water in the arid site and decreased it in the mesic site. High variability resulted in a high frequency of large rainfall events, which in turn resulted in a downward shift of the distribution of water availability in the soil profile that reduced bare-soil evaporative losses and enhanced deep percolation losses. Therefore, an increase in variability decreased losses in arid ecosystems where losses occurred predominantly via bare-soil evaporation. On the contrary, increased precipitation variability increased losses in the mesic ecosystem, where major losses occurred via deep percolation. Given the tight relationship that exists between transpiration and photosynthesis, we expect that an increase in precipitation interannual variability will increase productivity in the arid site and reduce it in the mesic site.