Interseeding alfalfa (Medicago sativa L.) can improve forage quality of grasslands by adding a high-protein species, but this runs the risk of accelerating soil water depletion. The objective was to evaluate effects of cultivar and row spacing of alfalfa on soil water balance and plant water potentials (Ψ) of two upright-type cultivars, NuMex Bill Melton and WL 440HQ, and a prostrate-type Falcata-Rhizoma blend, interseeded into native grasses in October 2015 near Lubbock, Texas. Alfalfa was interseeded at 36-cm (narrow) and 71-cm (wide) row spacings. Soil volumetric water content (VWC) and midday Ψstem and Ψleaf were measured weekly in 2017 and 2018 growing seasons. Soil VWC was not affected by alfalfa cultivars (P >.05), whereas alfalfa row spacings differed (P <.05). Narrow spacing caused lower (P <.05) VWC than wide spacing relative to the grass-only control in both the upper 40- and 40- to 100-cm layers of the soil. Wide-row spacing had similar VWC to control in 2017 for both soil layers (P >.05). Soil water depletion increased with alfalfa crown density (r =.60, P <.05) in association with enhanced evapotranspiration and denser root mass below 30-cm soil depth. Grass and alfalfa Ψstem and Ψleaf were depressed in narrow rows relative to wide rows and control, indicating that presence of alfalfa intensified competition with the grass for soil water. The wide-row treatment seldom had adverse effects on grass water stress. Wide-row spacing achieved a favorable compromise between enhanced water use and improved stand productivity.