Global atmospheric CO-2 is increasing at a rate of 1.5-2 ppm per year and is predicted to double by the end of the next century. Understanding how terrestrial ecosystems will respond in this changing environment is an important goal of current research. Here we present results from a field study of elevated CO-2 in a California annual grassland. Elevated CO-2 led to lower leaf-level stomatal conductance and transpiration (approximately 50%) and higher mid-day leaf water potentials (30-35%) in the most abundant species of the grassland, Avena barbata Brot. Higher CO-2 concentrations also resulted in greater midday photosynthetic rates (70% on average). The effects of CO-2 on stomatal conductance and leaf water potential decreased towards the end of the growing season, when Avena began to show signs of senescence. Water-use efficiency was approximately doubled in elevated CO-2, as estimated by instantaneous gas-exchange measurements and seasonal carbon isotope discrimination. Increases in CO-2 and photosynthesis resulted in more seeds per plant (30%) and taller and heavier plants (27% and 41%, respectively). Elevated CO-2 also reduced seed N concentrations (9%).