Grazing of wooded grasslands by domestic stock has led to dominance by woody plants, in many parts of the world. In semi—arid grasslands in Australia Dodonaea attenuata is a common, invasive shrub of perennial grasslands on sandy soils. There is evidence that cohorts of D. attenuata establish infrequently in vigorous grasslands and more frequently where the perennial grass has been damaged by overgrazing. This study examined the influence of herbaceous growth on mortality of D. attenuata seedlings, by growing them in plots with controlled moisture input. The herbaceous layer in the plots was either natural, clipped, or killed. Without summer irrigation all the seedlings in the natural grassland died. Seedling survival was inversely related to the amount of herbaceous growth on the other treatments. Summer irrigation maintained D. attenuata seedlings and produced a large biomass of perennial grass, which left the seedlings susceptible to grass fires. A water—balance model was run for the experimental site for the 97 yr of climatic records. The soil—moisture patterns associated with the establishment of three known cohorts of D. attenuata were identified. The model output was interrogated for similar soil moisture patterns in other years. It was estimated that only six widespread D. attenuata establishment events have occurred in 97 yr. In intact grasslands D. attenuata rarely establishes densely, and when it does so it is susceptible to grass fires. Modern management has increased establishment frequency by increasing the availability of summer soil moisture by overgrazing the grasslands and has suppressed grass fires. This has changed open grassland to dense shrubland.