Periodic fire, grazing, and a variable climate are considered the most important drivers of tallgrass prairie ecosystems, having large impacts on the component species and on ecosystem structure and function. We used long-term experiments at Konza Prairie Biological Station to explore the underlying demographic mechanisms responsible for tallgrass prairie responses to two key ecological drivers: fire and grazing. Our data indicate that belowground bud banks (populations of meristems associated with rhizomes or other perennating organs) mediate tallgrass prairie plant response. Fire and grazing altered rates of belowground bud natality, tiller emergence from the bud bank, and both short-term (fire cycle) and long-term (>15 year) changes in bud bank density. Annual burning increased grass bud banks by 25% and decreased forb bud banks by 125% compared to burning every 4 years. Grazing increased the rate of emergence from the grass bud bank resulting in increased grass stem densities while decreasing grass bud banks compared to ungrazed prairie. By contrast, grazing increased both bud and stem density of forbs in annually burned prairie but grazing had no effect on forb bud or stem density in the 4-year burn frequency treatment. Lastly, the size of the reserve grass bud bank is an excellent predictor of long-term ANPP in tallgrass prairie and also of short-term interannual variation in ANPP associated with fire cycles, supporting our hypothesis that ANPP is strongly regulated by belowground demographic processes. Meristem limitation due to management practices such as different fire frequencies or grazing regimes may constrain tallgrass prairie responses to interannual changes in resource availability. An important consequence is that grasslands with a large bud bank may be the most responsive to future climatic change or other global change phenomena such as nutrient enrichment, and may be most resistant to exotic species invasions.