Grasslands provide a range of vital ecosystem services, such as biomass production, water retention, groundwater protection, carbon sequestration, and biodiversity. The intensification of grassland farming in recent decades has resulted in a loss of plant species. Climate change causes an increase in average temperatures and a higher variability of weather events, notably flooding and drought periods, which pose risks to current agricultural practices. The aim of this chapter is to explore the potential for increasing biodiversity as a part of a transformation towards a more sustainable and resilient agricultural grassland management under conditions of climate change. We use concepts of plant functional traits and functional groups to explain interactions between plant diversity, site conditions and effects of climate change. The review follows two approaches: (i) at the field scale, which is how more diverse swards can support biomass production, and (ii) at the landscape scale, which is the role of increased heterogeneity. We conclude that there is a range of management options at both the field and the landscape scale to increase biodiversity. However, the question of the exact role of plant diversity on mitigating adverse climate change effects on grassland production cannot, as yet, be fully answered.