- Questions Can theory about plant–plant interactions along climate gradients help us predict how climate change will affect shrub establishment? How does a predicted reduction in rainfall affect the outcome of the interactions between shrub seedlings and herbaceous plants in a dryland ecosystem? Location Three field sites along a rainfall gradient and an adjacent experimental site at the Botanical Gardens of Tel Aviv University, Israel. Method We measured seedling survival of a dominant shrub species in response to the presence of herbaceous neighbours and to rainfall amount using two approaches: First, we employed a space-for-time approach and studied seedling survival along an aridity gradient that was shown to mimic the predicted rainfall changes. Second, we monitored seedling survival in a common garden experiment in which we simulated drought using rainout shelters. In both experiments we contrasted the importance of water availability relative to the presence of herbaceous neighbours and the origin of the shrub seedlings. Results Our results showed that neighbours always had a negative effect on shrub seedling survival. In contrast to theoretical predictions, the intensity of competition increased with reduction in water availability. Shrub seedlings originating from drier conditions showed higher survival than seedlings from mesic origin. Conclusions These results emphasize the importance of incorporating biotic interactions in studies predicting changes in plant dynamics under climate change. Moreover, plant species growing in ecosystems prone to high rainfall variability showed a greater ability to cope with dry conditions, which suggests more nuanced origin-specific predictions than suggested by recent climate models.