Survival and growth of first-year seedlings of the broad-leaved Banksia hookeriana and B. attenuata were lower in the rehabilitation site than in two contrasting natural areas, but the needle-leaved B. leptophylla survived and grew equally well in all three sites. Root system development was poorer in the rehabilitation site: tap-roots stopped at the topsoil/subsoil boundary at 0.1 m in the rehabilitation site, while they reached 2 m at the natural sites. Seedlings in the rehabilitation site had much lower pre-dawn xylem pressure potentials (XPP) and stomatal conductance. Soil water potentials (ψ) in the top 0.5 m of the soil profile were generally lowest at the natural sites, and almost always lower than XPP. At these sites, seedlings must have been obtaining water over summer-autumn from deeper in the soil via their well-developed tap-roots. Topsoil ψ in the rehabilitation site was more similar to XPP than the much higher values in the subsoils, which rarely contained roots. Impedance of the rehabilitation soils, significantly greater than that for soils at the two natural sites, appeared to explain the poor root development and dependence of seedlings on soil water stored near the surface; the consequent lower xylem potentials, stomatal conductances and growth rates; and the ultimately higher mortality levels.