Water provision and carbon sequestration are two important ecosystem services for sustaining the  current land-use. These services are regulated in part by the control vegetation exerts over water  and carbon fluxes to and from the soil. Woody plant encroachment is a widespread global phenomenon whereby grasslands are converted to patches or uniform cover of woody shrubs and trees. This vegetation shift has important consequences for the water and carbon cycles. Woody plants tend to be deeper rooted than the grasses they replace and may have greater leaf area index, reducing groundwater recharge from the area. The vegetation shift also affects inputs and decomposition of organic matter, changing the carbon storage. Here, we examined soil cores in 5 paired grassland/woodland sites along a precipitation gradient in the southwestern US. Cores were analyzed for soil moisture and chloride to estimate groundwater recharge rates using the chloride mass balance approach. Recharge rates varied from 0.1 mm to 5 mm per year. Across all the sites, groundwater recharge was reduced with woody plant encroachment by about 40%, though the differences are most meaningful at the wetter end of the gradient. We discuss the loss of water yield in the context of previously measured changes in carbon sequestration at these sites.