Response diversity (RD) is widely expected to stabilize ecosystem functioning via compensatory dynamics. However, the mechanisms generating RD and the conditions under which it enhances stability remain unclear. Using 43 years of monthly phytoplankton data from two contrasting stations in Lake Kasumigaura, Japan, we applied empirical dynamic modeling (EDM) to quantify time-varying RD and its causal links with functional diversity (FD) and primary productivity stability. We found that FD, particularly functional richness, consistently promoted RD at both stations. In contrast, the stabilizing effect of RD on primary productivity was strongly context-dependent, driven by differences in the effects of nutrient composition under nutrient-rich versus nutrient-poor conditions. These findings demonstrate that while FD reliably generates response diversity, the ecosystem-level consequences of RD are highly context-dependent. This decoupling has important implications for predicting aquatic ecosystem responses to ongoing nutrient enrichment and global change, and for managing long-term ecosystem stability.