Water availability defines and is the most frequent control on processes in arid and semiarid ecosystems. Despite widespread recognition of the importance of water in dry areas, knowledge about key processes in the water balance is surprisingly limited. How water is partitioned between evaporation and transpiration is an area about which ecosystem ecologists have almost no information. We used a daily time step soil water model and 39 years of data to describe the ecohydrology of a shortgrass steppe and investigate how manipulation of soil and vegetation variables influenced the partitioning of water loss between evaporation and transpiration. Our results emphasize the overwhelming importance of two environmental factors in influencing water balance processes in the semiarid shortgrass steppe; high and relatively constant evaporative demand of the atmosphere and a low and highly variable precipitation regime. These factors explain the temporal dominance of dry soil. Annually and during the growing season 60-80% of the days have soil water potentials less than or equal to −1.5 MPa. In the 0-15 cm layer, evaporation accounts for half of total water loss and at 15-30 cm it accounts for one third of the loss. Annual transpiration/actual evapotranspiration (T/AET) ranged from 0.4-0.75 with a mean of 0.51. The key controls on both T/AET and evaporation/actual evapotranspiration in order of their importance were aboveground biomass, seasonality of biomass, soil texture, and precipitation. High amounts of biomass and late timing of the peak resulted in the highest values of T/AET.