Due to frequent fire, low nutrient availability, and prolonged drought, tropical savanna is a stressful environment for the survival and growth of woody plant seedlings. To understand why forest species do not succeed in this environment while savanna species are able to persist, the effects of fire and woody cover on seedlings of these two functional groups were investigated in the Brazilian Cerrado. Seedlings were established in experimental plots under three densities of woody cover, in sites protected from fire and sites to be subjected to fire. There was a clear difference in the ability of savanna and forest species to survive fire. None of the three forest species were able to survive fire during the first two years of life, whereas eight of the nine savanna species were able to resprout following fire. The small seed size of the ninth savanna species, Miconia albicans, predisposed its seedlings to be sensitive to fire, because there was a strong positive correlation between seed size and survivorship. Savanna species were less dependent on woody cover than were forest species, which exhibited higher growth and survival under tree canopies than in open grassland. The low rates of establishment and survival of forest trees in savanna, combined with high sensitivity to fire, appear sufficient to prevent the expansion of forest into savanna under current fire regimes in the Cerrado.