Scattered trees in grass-dominated ecosystems often act as islands of fertility with important influences on community structure. Despite the potential for these islands to be useful in restoring degraded rangelands, they can also serve as sites for the establishment of fast growing non-native species. In California oak savannas, native perennial grasses are rare beneath isolated oaks and non-native annual grasses dominate. To understand the mechanisms generating this pattern, and the potential for restoration of native grasses under oaks, we asked: what are the effects of the tree understory environment, the abundance of a dominant non-native annual grass (Bromus diandrus), and soils beneath the trees on survival, growth, and reproduction of native perennial grass seedlings? We found oak canopies had a strong positive effect on survival of Stipa pulchra and Poa secunda. Growth and reproduction was enhanced by the canopy for Poa but negatively impacted for Stipa. We also found that Bromus suppressed growth and reproduction in Stipa and Poa, although less so for Stipa. These results suggest the oak understory may enhance survival of restored native perennial grass seedlings. The presence of exotic grasses can also suppress growth of native grasses, although only weakly for Stipa. The current limitation of native grasses to outside the canopy edge is potentially the result of interference from annual grasses under oaks, especially for short-statured grasses like Poa. Therefore, control of non-native annual grasses under tree canopies will enhance the establishment of S. pulchra and P. secunda when planted in California oak savannas.