In California, the common native shrub, Baccharis pilularis DC. (coyote brush, Asteraceae) readily invades grasslands in the absence of fire and grazing. Research shows that water availability is important in regulating B. pilularis seedling establishment in grasslands, with late spring rainfall providing a timely source of moisture that helps B. pilularis roots compete with neighboring grassland plants. The ecohydrology of B. pilularis, particularly during invasion into grasslands, remains largely unexplored. For this research I investigated 1) intraspecific variation in water relations between the prostrate B. pilularis ssp. pilularis and erect B. pilularis ssp. consanguinea (herein B. pilularis) in a mature common garden, 2) seasonal water relations and use of experimentally planted B. pilularis seedlings with and without neighboring plants in cool, fog-prone, perennial-dominated and warm, dry annual-dominated coastal grasslands, and 3) seasonal water relations between experimental B. pilularis seedlings and naturally-occurring adults in the two contrasting grassland types. For these studies I measured a suite of water relations traits including stomatal conductance, stem water potentials, leaf stable carbon isotope composition, tissue-level parameters that reflect cell hydration, stable isotope composition of xylem water, and whole stem hydraulic conductance. First, I found that despite the decreasing water availability during the rainless summer, both B. pilularis morphotypes increased rates of stomatal conductance and photosynthesis. These increases are likely a strategy to meet increased carbon demands before B. pilularis’ fall blooming period, so the plants can produce adequate numbers of wind-pollinated and wind-dispersed flowers to ensure successful dispersal and establishment into neighboring grasslands. Second, a manipulative neighbor removal treatment demonstrated that grassland neighbors harvest fog for use by B. pilularis seedlings when fog water is present but not in the warm, dry annual grassland with very little fog where seedlings grew significantly better. Third, as expected, adults showed greater tolerance for water deficit and seedlings readily used fog water when fog was present. As in Chapter One, plants in both age classes show the same increased demand for carbon before the onset of the blooming period as demonstrated by increased stomatal conductance, osmotic adjustment, bulk leaf δ13C during the rainless summer. These results provide evidence that B. pilularis is well adapted to withstand water deficits yet plant water status can benefit from neighbors in fog-prone areas. In a warmer and drier climate, this shrub will likely become an increasingly dominant presence throughout the California Floristic Province.