The impacts of a 40 ha stand of Eucalyptus camaldulensis in the Pampas grasslands of Argentina were explored for 2 years using a novel combination of sap flow, groundwater data, soil moisture measurements, and modeling. Sap flow measurements showed transpiration rates of 2–3.7 mm d−1, lowering groundwater levels by more than 0.5 m with respect to the surrounding grassland. This hydraulic gradient induced flow from the grassland areas into the plantation and resulted in a rising of the plantation water table at night. Groundwater use estimated from diurnal water table fluctuations correlated well with sap flow (p < 0.001, r2 = 0.78). Differences between daily sap flow and the estimates of groundwater use were proportional to changes in surface soil moisture content (p < 0.001, r2 = 0.75). E. camaldulensis therefore used both groundwater and vadose zone moisture sources, depending on soil water availability. Model results suggest that groundwater sources represented ∼67% of total annual water use.