Continuing on from previous work examining the mechanisms by which increases in the biomass of Panicum maximum might occur when growing under the canopy of mature Samanea saman trees (Durr and Rangel 2000), a further pot trial was undertaken. This applied a similar methodology of using soil collected from under and away from the canopy of trees and imposing variable light levels by shade cloths. A third variable was intro- duced, that of water stress, through varying the period of re-watering: every day, every 5 days and every 10 days. The major effect of water stress was to reduce the biomass. However, the degree of reduction was dependent upon the soil and the shade level, as there was relative com- pensation in grasses grown in the subcanopy- collected soil at intermediate shade levels due to an increase in the water use efficiency. This finding suggests that one of the major benefits of nutrient enrichment by trees in these environ- ments acts via improved water utilisation and suggests a generalised explanation of why rela- tive increases of grass biomass under the canopy of trees might occur in subhumid environments.