Measurements were conducted within a fence-exclosure between February 2008 and July 2009 to investigate the influence of soil moisture on ecosystem CO2 fluxes in a Themeda triandra-dominated grassland of a humid Kenyan savanna. Rainout shelters were constructed to reduce ambient rainfall by 0%, 10% and 20% respectively to attain variable soil water content (SWC) during plant growth. SWC within the top 30 cm layer, above-ground biomass, soil and plant nitrogen (N) concentrations were assessed monthly alongside CO2 fluxes. Net ecosystem CO2 exchange (NEE) and ecosystem respiration (Reco) were measured with closed chambers while carbon (C) partitioning during the wet and dry seasons were assessed through pulse 13C labelling. There were significant seasonal and between plot differences in SWC, above-ground biomass, canopy light utilization efficiency (α), CO2 fluxes and C allocation pattern resulting from differences in SWC. The ecosystem was a net C sink during the wet and C neutral during the dry seasons. The study showed strong seasonal fluctuations in ecosystem CO2 fluxes and underscores the significant role of the savanna grasslands in regional C balance due to its expansive nature. The savanna grassland is however vulnerable to low soil moisture, with significant reduction in CO2 uptake during drought.