A popular hypothesis for tree and grass coexistence in savannas is that tree seedlings are limited by competition from grasses. However, competition may be important in favourable climatic conditions when abiotic stress is low, whereas facilitation may be more important under stressful conditions. Seasonal and inter-annual fluctuations in abiotic conditions may alter the outcome of tree-grass interactions in savanna systems and contribute to coexistence. We investigated interactions between coolibah (Eucalyptus coolabah) tree seedlings and perennial C4 grasses in semi-arid savannas in eastern Australia in contrasting seasonal conditions. In glasshouse and field experiments, we measured survival and growth of tree seedlings with different densities of C4 grasses across seasons. In warm glasshouse conditions, where water was not limiting, competition from grasses reduced tree seedling growth but did not affect tree survival. In the field, all tree seedlings died in hot dry summer conditions irrespective of grass or shade cover, whereas in winter, facilitation from grasses significantly increased tree seedling survival by ameliorating heat stress and protecting seedlings from herbivory. We demonstrated that interactions between tree seedlings and perennial grasses vary seasonally, and timing of tree germination may determine the importance of facilitation or competition in structuring savanna vegetation because of fluctuations in abiotic stress. Our finding that trees can grow and survive in a dense C4 grass sward contrasts with the common perception that grass competition limits woody plant recruitment in savannas. © 2014 Springer-Verlag Berlin Heidelberg.