Fast-growing exotic trees are widely planted in the tropics to counteract deforestation; however, their patterns of water use could be detrimental to overall ecosystem productivity through their impact on ecosystem water budget. In a comparative field study on seasonal soil-plant water dynamics of two exotic species (Cupressus lusitanica Mill. and Eucalyptus globulus Labill.) and the indigenous Podocarpus falcatus (Thunb.) Mirb. in south Ethiopia, we combined a 2.5-year record for climate and soil water availability, natural-abundance oxygen isotope ratios (delta(18)O) of soil and xylem water, destructive root sampling and transpiration measurements. Soil was generally driest under C. lusitanica with its dense canopy and shallow root system, particularly following a relatively low-rainfall wet season, with the wettest soil under E. globulus. Wet season transpiration of C. lusitanica was twice that of the other species. In the dry season, P. falcatus and C. lusitanica reduced transpiration by a factor of six and two, respectively, whereas E. globulus showed a fivefold increase. In all species, there was a shift in water uptake to deeper soil layers as the dry season progressed, accompanied by relocation of live fine root biomass (LFR) of C. lusitanica and P. falcatus to deeper layers. Under P. falcatus, variability in soil matric potential, narrow delta(18)O depth gradients and high LFR indicated fast water redistribution. Subsoil water uptake was important only for E. globulus, which had low topsoil LFR and tap roots exploiting deep water. Although P. falcatus appeared better adapted to varying soil water availability than the exotic species, both conifers decreased growth substantially during dry weather. Growth of E. globulus was largely independent of topsoil water content, giving it the potential to cause substantial dry-season groundwater depletion.