Traditional conservation biology regards environmental fluctuations as detrimental to persistence, reducing long-term average growth rates and increasing the probability of extinction. By contrast, coexistence models from community ecology suggest that for species with dormancy, environmental fluctuations may be essential for persistence in competitive communities. We used models based on California grasslands to examine the influence of interannual fluctuations in the environment on the persistence of rare forbs competing with exotic grasses. Despite grasses and forbs independently possessing high fecundity in the same types of years, interspecific differences in germination biology and dormancy caused the rare forb to benefit from variation in the environment. Owing to the buildup of grass competitors, consecutive favorable years proved highly detrimental to forb persistence. Consequently, negative temporal autocorrelation, a low probability of a favorable year, and high variation in year quality all benefited the forb. In addition, the litter produced by grasses in a previously favorable year benefited forb persistence by inhibiting its germination into highly competitive grass environments. We conclude that contrary to conventional predictions of conservation and population biology, yearly fluctuations in climate may be essential for the persistence of rare species in invaded habitats.