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Question: Climate change has been shown to cause shifts in plant–soil feedbacks (PSFs) that may affect plant community dynamics, but the effect of prolonged drought is uncertain. We asked whether prolonged drought legacies cause shifts in PSFs due to changes in plant–soil biotic interactions. Location: Richmond, New South Wales, Australia. Methods: We collected soils from a five‐year field‐based rainfall manipulation experiment simulating ambient rainfall and drought (50% reduction) in a mesic temperate grassland. PSFs of twelve plant species representing four functional groups (C3 and C4 grasses, forbs, and legumes) were assessed when grown alone and in mixed cultures (one species from each of the four functional groups) under laboratory conditions following a standard PSF protocol in soils with ambient rainfall and drought legacies. All soils were sterilised and then re‐inoculated to create the respective treatments including a non‐inoculated control for biota‐mediated PSFs. Results: PSFs varied considerably among species and functional types in both legacy treatments. Overall, C3 grasses displayed less negative and C4 grasses less positive PSFs in soils with a legacy of prolonged drought compared with soils with ambient rainfall legacies, while PSFs for forbs and legumes were not significantly different from zero in either rainfall treatment. However, PSFs differed between species within functional groups. For example, Plantago showed positive PSFs in soils with ambient rainfall legacies but negative PSFs in soils with drought legacies while the opposite was observed for Medicago. PSFs of the mixed communities showed a trend to shift from positive to neutral in soils with drought legacies, with significant differences in PSFs observed when comparing home vs sterile soils, suggesting that drought may destabilise plant communities. Conclusions: Our results provide evidence that prolonged drought legacies can modify plant community dynamics due to species‐specific changes in PSFs that persist after droughts are alleviated. [ABSTRACT FROM AUTHOR]