- The effects of neighbours on drought resistance were tested for two perennial bunchgrasses that co-occur throughout a small-scale productivity gradient in a desert grassland in New Mexico. Seedlings of the relatively mesicSporobolus airoides and the relatively xeric Scleropogon brevifolius were grown alone and in intra- and interspecific pairs for 45 days after which they were left unwatered. Time to shoot death and subsequent revival success were monitored. Regardless of treatment, Scleropogon brevifolius was smaller at the end of the pre-drought period, survived longer into a drought and was more likely to revive after apparent above-ground death. Interspecific (but not intraspecific) neighbours strongly influenced relative biomass allocation to roots. It is concluded that the lack of effects of neighbours on total growth does not necessarily indicate that neighbours do not affect fitness by triggering morphological shifts. The study demonstrates the need both for incorporation of competition into studies of the physiology of drought resistance and plasticity and their possible implications in plant competition and community organization.