Populus euphratica is now facing with hard regeneration and degeneration due to restriction of water and soil salinity in hyperarid area in Northwest China, while the co-dominated shrub Tamarix ramosissima in riparian forests keeps expanding. As the two species are both primarily constructive in riparian forests, the relationship between them plays an important role in maintaining desert riparian ecosystem. At present, whether Tamarix ramosissima has become a threat to regeneration of Populus euphratica in the oases with changing hydrological environment remains unknown since previous studies focused primarily on impacts of abiotic stresses and the relationship between the two species is still unclear. Thus, a controlled greenhouse experiment was carried out to investigate how annual Populus euphratica seedlings response to neighboring Tamarix ramosissima seedlings under various water and salinity conditions. Populus euphratica seedlings were neighbored by their conspecific individuals or Tamarix ramosissima seedlings. Three levels of water conditions (low-water, medium-water and high-water treatment) and salinity conditions (low-salinity, medium-salinity and high-salinity treatment) intersected with each other, resulting in 18 treatments in total. The number of surviving Populus euphratica seedlings in each treatment were calculated and growth indexes were measured in this experiment. The results showed that neighboring Tamarix ramosissima seedlings inhibited growth and survival of Populus euphratica seedlings remarkably. Survival of Populus euphratica seedlings neighbored by Tamarix ramosissima seedlings significantly decreased, but it increased as water condition improved. Salinity had no effects on survival of seedlings. The significantly interactive effects were observed among water, soil salinity and neighbor conditions. Height, main root length, aboveground and belowground biomass of Populus euphratica seedlings decreased while being neighbored by Tamarix ramosissima under each treatment (P<0.001), among which main root length had the slightest reduction. However, root/shoot ratio increased, indicating a competition induced modification of biomass allocation of Populus euphratica seedlings. Moreover, Populus euphratica seedlings were more vulnerable to drought and salinity stress while competing with Tamarix ramosissima. Relative competitive intensity (RCI) for both aboveground and belowground decreased as water availability improved. Therefore, sufficient water supply is a key factor to the two species to co-exist, otherwise Populus euphratica seedlings would die of drought because of its poorer water absorbing capacity than Tamarix ramosissima, which might be a reason for the failed regeneration of Populus euphratica and gradual expansion of Tamarix ramosissima to broader range of riparian zone. Our research highlighted difference in adaptation between the two species determined plant-soil interaction in the development of riparian vegetation, resulting in the degeneration of Populus euphratica during succession.