Environmentally cued germination may play an important role in promoting coexistence in Mediterranean annual plant systems if it causes niche differentiation across heterogeneous microsite conditions. In this study, we tested how microsite conditions experienced by seeds in the field and light conditions in the laboratory influenced germination in 12 common annual plant species occurring in the understorey of the York gum-jam woodlands in southwest Western Australia. Specifically, we hypothesized that if germination promotes spatial niche differentiation, then we should observe species-specific germination responses to light. In addition, we hypothesized that species’ laboratory germination response may depend on the microsite conditions experienced by seeds while buried. We tested the laboratory germination response of seeds under diurnally fluctuating light and complete darkness, which were collected from microsites spanning local-scale environmental gradients known to influence community structure in this system. We found that seeds of 6 out of the 12 focal species exhibited significant positive germination responses to light, but that the magnitude of these responses varied greatly with the relative light requirement for germination ranging from 0.51 to 0.86 for these species. In addition, germination increased significantly across a gradient of canopy cover for two species, but we found little evidence to suggest that species’ relative light requirement for germination varied depending on seed bank microsite conditions. Our results suggest that variability in light availability may promote coexistence in this system and that the microsite conditions seeds experience in the intra-growing season period can further nuance species germination behaviour.