Abstract: Traditionally the presence of large numbers of woody plants in rangelands is thought to reflect declining rangeland health and reduced pastoral productivity. However, an increasing body of evidence suggests that shrubs may provide an important ecological role by providing habitat for understorey plants, particularly in overgrazed and degraded rangeland. To test this we examined the role of trees and shrubs in facilitating understorey growth along a gradient representing three degradation states in semi-arid Australia. There was a significant difference in plant composition under tree and shrub canopies and in the open along the degradation gradient. We recorded significantly greater plant richness (Chao2–adjusted) under shrubs (17.1 species) than under trees (12.4) or in the open (8.2). Larger shrub canopies supported more species, and this effect was more pronounced with increasing degradation. Our results indicate that the sub–canopy area of woody shrubs likely facilitates the growth and survival of a diverse and productive understorey community. Studies of the relative effects of trees and shrubs on soil surface processes are needed to enhance our understanding of the importance of woody plants as facilitators of plant growth in semi-arid environments.