Encroachment of open woodlands by shrubs is a global phenomenon associated with marked changes in ecosystem structure and function. We measured sorptivity and steady-state infiltration at two supply potentials under shrubs and grasses and in their interspaces where shrubs were encroaching into grassland. Steady-state infiltration (ponded) and sorptivity were greater at the grassland than the shrubland site, and there was substantially greater infiltration under shrubs (48.2 mm h−1) and grasses (50.0 mm h−1) than the corresponding interspaces (17.0 and 32.3 mm h−1 for shrubland and grassland, respectively). The difference between grasses and their interspaces was substantially less (1.5 times) than that between shrubs and their interspaces (three times). Shrub encroachment also affected the spatial patterns of infiltration. Although the autocorrelation range for shrublands coincided almost exactly with the average distance between shrub canopies (3.5 m), the range for grasslands was three times greater (1.5 m) than the mean grass canopy, indicating a greater connectivity of infiltration in the grasslands than the shrublands. Our study indicates that encroachment by shrubs does not change infiltration under individual plants. Rather, it reduces the interspace infiltration rates significantly, resulting in lower estimated site-level infiltration rates in shrublands. Our research suggests therefore that it is the shrubland interspaces that are the likely drivers of reduced infiltration rates when grasslands are encroached, rather than increase in the total cover of shrubs per se. Management strategies that result in greater retention of grass cover and minimize the level of interspace disturbances are likely to result in increased infiltration. Copyright © 2014 John Wiley & Sons, Ltd.