Although buffel grass (Cenchrus ciliaris) invasions on several continents have significant ecological impacts, little information is available on its effect on seedling emergence and establishment of native vegetation. In highly impacted areas of the Sonoran Desert of North America, perennial plants are particularly vulnerable during their seedling stage. We studied the impact of buffel grass on the emergence, survival, and water stress in the seedlings of a locally dominant native tree, the foothills palo verde (Parkinsonia microphylla), using two pot experiments. In the first experiment, we compared the germination, growth, and survival of concentric rings of palo verde seedlings around mature individuals of buffel grass, a native shrub of a similar diameter and height to buffel grass, or in a pot with bare soil. In the second experiment, we compared the competitive effects of buffel grass seedlings on palo verde seedlings with the effects of conspecific seedlings, again using germination, growth, and survival as metrics. We followed up both experiments by quantifying the ratio of stable carbon isotopes in the tissues of the palo verde seedlings, which can be an indicator of water stress. We found evidence of relatively greater water stress in palo verde seedlings grown with buffel grass seedlings in pots than those grown with no competitor, and reduced survival of palo verde seedlings when grown with mature buffel grass. Our results highlight the need for more manipulative studies of density to improve mechanistic understanding of population dynamics, and to forecast how populations and communities will respond in the long term to perturbations such as invasion.