The oxygen isotope composition (δ18O) of leaf water (δ18Oleaf) is an important determinant of environmental and physiological information found in biological archives, but the system-scale understanding of the propagation of the δ18O of rain through soil and xylem water to δ18Oleaf has not been verified for grassland. Here we report a unique and comprehensive dataset of fortnightly δ18O observations in soil, stem and leaf waters made over seven growing seasons in a temperate, drought-prone, mixed-species grassland. Using the ecohydrology part of a physically based, 18O-enabled soil–plant–atmosphere transfer model (MuSICA), we evaluated our ability to predict the dynamics of δ18O in soil water, the depth of water uptake, and the effects of soil and atmospheric moisture on 18O enrichment of leaf water (Δ18Oleaf) in this ecosystem. The model accurately predicted the δ18O dynamics of the different ecosystem water pools, suggesting that the model generated realistic predictions of the vertical distribution of soil water and root water uptake dynamics. Observations and model predictions indicated that water uptake occurred predominantly from shallow (<20 cm) soil depths throughout dry and wet periods in all years, presumably due (at least in part) to the effects of high grazing pressure on root system turnover and placement. Δ18Oleaf responded to both soil and atmospheric moisture contents and was best described in terms of constant proportions of unenriched and evaporatively enriched water (two-pool model). The good agreement between model predictions and observations is remarkable as model parameters describing the relevant physical features or functional relationships of soil and vegetation were held constant with one single value for the entire mixed-species ecosystem.