Seasonal availability of water is a key controlling factor in semi-arid savanna vegetation structure, function and interactions. Understanding of woody plant interactions with grasses in savannas has long been underpinned by Walter's two-layered niche differentiation hypothesis that postulates that grasses and trees source water from different depths. The Walter hypothesis persists in the literature, despite contrary evidence and a lack of quantitative empirical tests of the theory. We conducted a greenhouse experiment to determine the following: (1) whether tree seedlings and grasses obtain water from different depths on rocky and sandy soils; (2) whether interspecific competition affected tissue water content of clipped grasses; and (3) the influence of repeated grass clipping on soil moisture. Grass competition significantly reduced tree seedling rooting depth on both rocky and sandy substrates. Trees had significantly longer roots on rocky substrates than on sandy substrates for all combinations (trees only, trees with unclipped grasses and trees with clipped grasses). Results indicated a three-tier soil moisture depletion pattern, with a top layer (15 cm) exclusively exploited by grasses, an intermediate zone (25–35 cm) utilised by both grass and tree seedling roots and deeper subsoil exclusively tapped by tree seedling roots. Our results are consistent with Walter's hypothesis, but we distinguished between three rather than two layers of tree and grass root interactions in acquiring soil moisture. Copyright © 2012 John Wiley & Sons, Ltd.