Technical Abstract: There is growing interest in the addition of carbon as sucrose or sawdust to the soil as a tool to reduce plant-available nitrogen (N) and alter competitive interactions among species. The hypothesis that carbon addition changes N availability and thereby changes competitive dynamics between natives and exotics was tested in a California grassland that had experienced nitrogen (N) enrichment. Sawdust (1.2 kg m-2) was added to plots containing various combinations of three native perennial bunchgrasses, exotic perennial grasses, and exotic annual grasses. Sawdust addition resulted in higher microbial biomass-N, lower rates of net N mineralization and net nitrification, and higher concentrations of extractable soil ammonium in the soil. In year 1, sawdust addition decreased competitive suppression of seedlings of two native grass species by exotic annuals, as predicted, but there was no evidence of reduced growth of exotic grasses in sawdust-amended plots. In year 2, however, sawdust addition did not affect the interactions between the native and exotic grasses. In fact, the native perennial grasses that survived the first year of competition with annual grasses significantly reduced the above-ground productivity of annual grasses even without sawdust addition. These results suggest that restoration of native biodiversity should concentrate on establishment of individuals through the first growing season, after which native perennials are better capable of surviving competition with annual species.