Sulfur-coated urea (SCU) has been proposed as an alternate N source for use in small grain production in northern Idaho. Both the N release rate of sulfur-coated urea (SCU) and plant seedling emergence are affected by soil matric potential. Two studies were conducted under greenhouse conditions to determine the effects of banding SCU in direct contact with spring barley (Hordeum vulgare L., cv. Advance) at different soil matric potentials. Soil from the Ap horizon of a Palouse silt loam (fine-silty, mixed, mesic Pachic Ultic Haploxeroll) was collected for this study. Three SCU materials with varied release rates (SCU-10, SCU-20 and SCU-30) were banded with the barley seed at N rates of 0, 34, 67, 101 and 134 kg ha⁻¹ and soil matric potentials of −0.1, −0.2, −0.35 and −0.65 MPa. An additional study in which SCU-20 and SCU-30 were applied at N rates of 0, 25, 50, 75, 100, 125, 150, 175, 200, 225, 250 and 275 kg ha⁻¹ at −0.15 MPa was also conducted. For each SCU material there was a significant interaction of N rate with water potential. The SCU-10 (slowest release rate) material had minor adverse effects on seedling emergence at all N rates (above 0 kg ha⁻¹) and soil matric potentials evaluated. At the −0.65 MPa matric potential emergence was reduced at 67, 101 and 134 kg N ha⁻¹ when SCU-20 and SCU-30 served as N sources. The SCU-30 material reduced spring barley emergence to a greater extent than the SCU-20 material. As single parameters both water potential and N application rate had a significant effect on spring barley emergence. With soil moisture conditions that are typical in the spring in Idaho (-0.15 MPa), it appears that both SCU-20 and SCU-30 can be used as pop-up fertilizers for spring barley production without adversely affecting yield.