The establishment of forestry systems in arid and semiarid areas is difficult due to low precipitation and high evaporation rates. Plastic mulch is an effective cropping method used for water saving and increasing soil temperature. The effects of covering different surface areas with plastic mulch on soil moisture and soil temperature and their interactions with the rooting patterns, canopy development and establishment of Acacia saligna tree seedlings on stored water was studied. A total of 24 plots of 3.24 m2 were prepared and flooded with 330 mm.of water. No irrigation was added thereafter. Mulching treatments consisted of covering 0, 30, 75 and 100 % of the plot with a black polyethylene sheet. These treatments were applied to plots with and without tree seedlings. Soil moisture and root development were measured to a depth of 1.65 m at various distances from the trunk, in transparent pipes using a TRIME-TDR and Minirhizotron system, respectively. Thermocouples were used to determine soil temperature to a depth of .60 m. Plant height, stem diameter and photosynthetic and transpiration rates were also measured. Soil temperature was higher in the mulched plots. Temperatures close to the edged were lower than those close to the trunk for all depths. During the early stages the rate of water loss was affected by the presence of a mulch. Roots grew deeper in the 30 % mulch treatment and more laterally in the 100 % mulch cover and the lack of mulch produced the smallest root system. The highest increment in stem diameter, photosynthetic and transpiration rates were found the mulched treatments. These results indicate that polyethylene mulch modified soil moisture and soil temperature, which resulted in improved conditions for tree development.