Future projections suggest an increase in drought globally with climate change. Current vegetation models typically regulate the plant photosynthetic response to soil moisture stress through an empirical function, rather than a mechanistic response where plant water potentials respond to changes in soil water. This representation of soil moisture stress may introduce significant uncertainty into projections for the terrestrial carbon cycle. We examined the use of the soil moisture limitation function in historical and future emissions scenarios in nine Earth system models. We found that soil moisture‐limited productivity across models represented a large and uncertain component of the simulated carbon cycle, comparable to 3–286% of current global productivity. Approximately 40–80% of the intermodel variability was due to the functional form of the limitation equation alone. Our results highlight the importance of implementing mechanistic water limitation schemes in models and illuminate several avenues for improving projections of the land carbon sink. Plain Language Summary Understanding the environmental controls of terrestrial ecosystem productivity is of critical importance because terrestrial ecosystems directly impact the concentration of CO2 in the atmosphere. However, model projections disagree on the future sign and magnitude of terrestrial ecosystem CO2 drawdown, so it is uncertain if terrestrial ecosystems will continue to mitigate climate change in the future. Here we show that the current representation of water‐limited productivity across state‐of‐the‐art vegetation models is a large and uncertain component of terrestrial productivity, comparable in magnitude to current global productivity. Our results provide a foundation for improved projections of climate change impacts on terrestrial ecosystems, ranging from vegetation growth to agricultural productivity. Key Points Most global vegetation models represent plant water limitation with a rarely tested empirical function based solely on soil moisture Carbon cycle uncertainty associated with such soil moisture stress functions is comparable to current global gross primary productivity Forty to eighty percent of the soil water stress‐driven uncertainty in productivity among models is due to the functional form of the stress equation alone