Increasing densities of woody plants in savannas has been attributed to both elevated atmospheric CO2 and reduced burning with grazing management, such that the biome could represent a substantial carbon sink. However, we show that extreme droughts (less than two-thirds expected rainfall over 3 years) occur in the drier half of the savanna biome and can cause substantial tree death. An Australian case study reveals that a net increase in tree cover over five decades of above-average rainfall was offset by sudden tree death during drought. The relationship between woody cover change and rainfall is moderated by competition with growth being facilitated by low woody cover and drought-induced death more likely as the woody component of savanna increases. The results are not supportive of a sustained increase in the woody component of xeric savannas resulting from CO2 fertilization or land management. Extensive tree death in savanna regions will become a stark consequence of climate change if predictions of increasing severity and frequency of drought are realized.