Studying how metagenome composition and diversity varies along environmental gradients may improve understanding of the general principles of community and ecosystem structuring. We studied soil bacterial metagenomes along a precipitation gradient on the eastern Tibetan Plateau, varying between 500 mm and 60 mm mean annual precipitation (MAP). We found that lower MAP was strongly associated with reduced functional diversity of bacterial genes. It appears that extreme environmental conditions associated with aridity constrain the diversity of functional strategies present in soil biota - analogous to broad scale patterns found in plant functional diversity along environmental gradients. In terms of specific functions, more extreme arid conditions were also associated with increased relative abundance of genes related to dormancy and osmoprotectants. Decreased relative abundance of genes related to antibiotic resistance and virulence in more arid conditions suggests reduced intensity of biotic interaction under extreme physiological conditions. These trends parallel those seen in earlier, more preliminary comparisons of metagenomes across biomes.