Biodiversity plays a crucial role in driving multiple ecosystem functions in temperate grasslands. However, our understanding of how biodiversity regulates the impacts of desertification processes on ecosystem multifunctionality (EMF) remains limited. In this study, we investigate plant diversity, soil microbial diversity (fungal, bacterial, archaeal, and arbuscular mycorrhizal fungal (AMF) diversity), soil properties (soil water content, pH, and soil clay content), and multiple ecosystem functions (soil N mineralization, soil phosphatase activity, AMF infection rate, microbial biomass, plant biomass, and soil C and nutrients (N, P, K, Ca, Fe, Na, Cu, Mg, and Mn)) at six different grassland desertification intensities. The random forest model was conducted to assess the importance of soil properties, plant diversity, and soil microbial diversity in driving EMF. Furthermore, a structural equation model (SEM) was employed to analyze the indirect and direct impacts of these predictors on EMF. Our study showed that plant, soil bacterial, fungal, and archaeal diversity gradually decreased with increasing desertification intensity. However, only AMF diversity was found to be less sensitive to desertification. Similarly, EMF also showed a significant decline with increasing desertification. Importantly, both plant and soil microbial diversity were positively associated with EMF during desertification processes. The random forest model and SEM revealed that both plant and soil microbial diversity were identified as important and direct predictors of EMF during desertification processes. This highlights the primary influence of above- and below-ground biodiversity in co-regulating the response of EMF to grassland desertification. These findings have important implications for planned ecosystem restoration and sustainable grassland management.