Background: State transition from grassland to shrubland is synonymous with desertification in many arid rangeland systems. Traditional desertification models emphasize abiotic feedbacks that modify the physical environment in ways that promote shrub proliferation and impede grass survival. Inherent in this perspective is the assumption that biotic interactions between grasses and shrubs have little bearing on state transition dynamics. Furthermore, the extent to which density-dependent interactions among shrubs might determine the magnitude and pattern of their cover is unknown. We addressed these assumptions and knowledge gaps over 4 years using selective removal experiments. Shrub-on-Grass Interactions: Grass ANPP responded positively to shrub removal in all years, but more so in years with above-average rainfall and in plots with high shrub abundance. Grass allocation to vegetative reproduction and grass patch area also increased when shrub neighbors were removed. These results demonstrate that biotic interference by shrubs upon grasses can reinforce and magnify abiotic feedbacks during grassland–shrubland transitions. Grass-on-Shrub Interactions: In years with above-average growing season precipitation, ANPP of small shrubs increased when grasses were removed, a result not evident in dry years or in larger shrubs. Grasses may therefore slow the rate at which shrubs attain a physical stature that can modify the physical environment in self-promoting ways. Shrub-Shrub Interactions: Intraspecific interactions between shrubs were not evident in any year, supporting the assumption that abiotic variables rather than competitive interactions constrain maximum shrub cover. Summary: Results from these field experiments provide insights on how shrub-grass interactions amplify or dampen the abiotic drivers of desertification, help explain how woody plants can continue to proliferate despite low or reduced livestock grazing pressure, and generate hypotheses that can help us refine experiments to address the mechanisms of belowground competition at play where grasses and shrubs co-occur in arid ecosystems.