Savanna trees influence water, light and nutrient availability under their canopies, but the relative importance of these resources to understory plants is not well understood. In a three year study in a Texas savanna, trees infected with the disease oak wilt were used in a natural experiment to isolate the effects of light and soil resources, particularly water, in oak-understory interactions. Herbaceous biomass and transplanted Prosopis glandulosa (mesquite) seedling survival were monitored in plots under healthy and symptomatic Quercus fusiformis (live oak) trees, and in open sites. Shade cloth maintained similar mid-day light levels in plots under symptomatic and healthy trees. Plant physiological attributes, soil parameters and woody plant densities were also compared across habitats. Water availability was significantly lower under healthy trees than under symptomatic trees or in the open. Shade cloth plots under symptomatic trees had over twice the herbaceous biomass of ambient light plots under healthy trees. As these treatments had similar light and nutrient levels, greater water availability under symptomatic trees was probably a major factor increasing herbaceous productivity. Shade also affected herbaceous growth, and its importance varied seasonally with water availability. Woody seedling densities and 1996 mesquite transplant survival were significantly higher under trees than in the open, indicating facilitation of young woody plants by oaks. However, lower water potentials in older shrubs near healthy trees and similar shrub densities across habitats (in contrast to seedling densities) suggested oaks compete with other woody species as they age. Our data indicate that both facilitation and competition could have important roles in this savanna community, and competition for water may be a key mechanism in oak-understory plant interactions.