Technical Abstract: Changes in vegetation structure in pulse-driven, water-limited systems can have important and non-linear affects on ecosystem function and biogeochemical cycling. Conversion of grasslands to woodlands in these systems through woody plant encroachment also results in greater patch heterogeneity, and can promote the presence of a more diverse plant community. Along a semi-arid riparian corridor in S.E. Arizona, annual and ephemeral herbaceous plants are present primarily in areas with significant woody plant establishment. The herbaceous component of this ecosystem is active during late summer in response to seasonal monsoon precipitation, and is productive until the first frost. These herbs can fill in 75% of the understory with plants 1m in height and an average of 2.5 meters of leaf per meter of ground. Given this increase in aboveground photosynthetic biomass, at their peak seasonal activity, annual and ephemeral plants should have a significant contribution to ecosystem carbon and water cycles, and ecosystem water-use efficiency. We tested these effects through herbaceous plant removals at two sites concurrently monitoring ecosystem-level carbon and water fluxes in the San Pedro Riparian National Conservation Area: a shrubland with 50% woody shrub cover, and a woodland with a mature overstory of 75% woody cover.