Increasing atmospheric moisture content is expected to intensify precipitation extremes under climate warming. However, extreme precipitation sensitivity (EPS) to temperature is complicated by the presence of reduced or hook-shaped scaling, and the underlying physical mechanisms remain unclear. Here, by using atmospheric reanalysis and climate model projections, we propose a physical decomposition of EPS into thermodynamic and dynamic components (i.e., the effects of atmospheric moisture and vertical ascent velocity) at a global scale in both historical and future climates. Unlike previous expectations, we find that thermodynamics do not always contribute to precipitation intensification, with the lapse rate effect and the pressure component partly offsetting positive EPS. Large anomalies in future EPS projections (with lower and upper quartiles of −1.9%/°C and 8.0%/°C) are caused by changes in updraft strength (i.e., the dynamic component), with a contrast of positive anomalies over oceans and negative anomalies over land areas. These findings reveal counteracting effects of atmospheric thermodynamics and dynamics on EPS, and underscore the importance of understanding precipitation extremes by decomposing thermodynamic effects into more detailed terms.