In south-western Australia, a rare plant community is found on shallow, winter-wet ironstone soils, which occur on coastal plains as isolated islands in a matrix of surrounding deeper sandy soils. To test for local adaptation of species endemic to these communities and potential inhibitory effects of ironstone soils on other species, we compared two rare ironstone Hakea species with four of their common congeners. The common congeners were chosen from nearby winter-wet habitats on deeper sandy soils and from non-wetland woodland habitats (i.e. two species in each habitat group). Seedlings of all species were grown on ironstone soil and subjected to waterlogging in a glasshouse experiment. Significant habitat-related differences emerged only when seedlings were waterlogged. When compared with their controls, shoot and root growth rates of ironstone endemics were less affected by waterlogging than those of their common congeners. This was partly associated with their large accumulation of leaf starch, and their substantial adventitious-root formation. Leaves of ironstone endemics also exhibited consistently higher concentrations of Cu and Zn. In contrast to the effect of waterlogging in the glasshouse experiment, natural waterlogging of seedlings transplanted into ironstone communities led to high mortality, but only in the non-wetland Hakea species. Mortality was strongly associated with the intensity of flooding events, with very small differences in inundation level (10–15 mm) strongly influencing seedling survival. Our results suggest that the chemistry of the waterlogged ironstone soil, and species adaptations to it, are important for understanding distribution patterns of these Hakea species.