Mediterranean oak savannas cover about 4 million ha in California (northwest America) and 3 million ha in Spain and Portugal (southwest Europe), and are ecologically and socio-economically important systems. Here we review literature on the interactions between the two dominant elements of savannas - the oak overstorey, the herbaceous understorey, and the surrounding grassland matrix. We focus on the main ecological factors affecting the oak understorey environment: shade, soil moisture, soil nutrients, and animal-mediated effects. We then review the main features of the herbaceous community in the oak understorey, as compared to the adjacent open grassland, in terms of species composition, biomass, diversity, and soil seed bank. We examine processes associated with oak regeneration and growth, and their relationships with the herbaceous layer and other woody plants cover. Finally, we discuss the complex facilitative and interference interactions that occur in oak-grassland systems and review models proposed to explain the dynamics and coexistence of oak trees and herbaceous plants in savannas.