Plant competition for one resource has been well documented. Traditional competition theory states that when there is limitation by a single resource there should be competitive exclusion. In the model presented here, competition for nitrogen is mediated by soil moisture and can result in coexistence or alternative stable states as well as competitive exclusion. Nitrogen availability is regulated by soil moisture through a variety of mechanisms. Microbial processes in the soil such as decomposition of plant litter and soil organic matter, denitrification, and immobilisation are strongly regulated by soil moisture. Leaching and plant uptake are dependent on soil moisture as the transport medium for nitrogen. Plant species can affect soil moisture through mechanisms such as water uptake, canopy cover, and effects on the soil structure which impact on the water holding capacity of the soil. By affecting water availability, plants also indirectly affect nitrogen availability. We present a model of the nitrogen and water cycles including these mechanisms which is used to explore the impact of water use on competition for nitrogen. The model shows a range of competitive outcomes even though N is the only limiting factor, and we derive the conditions that lead to each of these competitive outcomes.