In recent years, several researchers have noted a lack of sexual regeneration by several oak species in Mediterranean coppice woodlands of the Iberian Peninsula. The abandonment of the traditional use of oak coppice stands has resulted in an increase in tree cover and density, which may affect microhabitat availability and oak recruitment. Microenvironmental heterogeneity is known to determine the successful recruitment of some Mediterranean oak species, but few studies have evaluated how competitive effects of herbaceous vegetation constrain oak recruitment at small spatial scales. We indirectly assessed how the herbaceous understory interacts with Quercus faginea recruitment in a stand in northeast Spain by (1) establishing the vulnerability of seedling xylem to cavitation as related to the water potential in healthy seedlings located outside herb patches and unhealthy seedlings situated within these patches and (2) characterizing the small-scale spatial pattern of Q. faginea regeneration and herb cover as related to other environmental factors. We mapped all individuals located within a 20- × 20-m plot, which was subdivided into 400 quadrats of 1 m² each, to estimate litter depth, herb and shrub cover, and sunlight in the understory. Water potentials of Q. faginea individuals decreased in the following order: adults > sprouts > healthy seedlings > unhealthy seedlings. The summer soil-water content in the uppermost 40 cm of the soil was lower in microsites within dense herb patches than in those with low herb cover. Dense herb cover was positively associated with a greater density of unhealthy Q. faginea seedlings. Our results indicate that competition with the understory herbs for soil water should be regarded as one of the main factors controlling recruitment of Mediterranean oaks.