Abstract. Terracing has long been considered one of the most effective measures for soil water conservation and site improvement. However, the quantitative effects of terracing on soil water dynamics and vegetation water use have not been reported. To fill these knowledge gaps, in this study, soil water content and canopy transpiration were monitored in both terrace and slope environments in the semiarid Loess Plateau of China in 2014 and 2015. Results showed that terracing increased soil water content of different soil layers. Mean soil water content of the terrace site was 25.4 % and 13.7 % higher than that in the slope site in 2014 and 2015, and canopy transpiration at the terrace site increased by 9.1 % and 4.8 %, respectively. Canopy conductance at the terrace site was 3.9 % higher than that at the slope site and it decreased logarithmically with vapor pressure deficit. This study highlighted the critical role of terracing in increasing the soil water content and mitigating water stress in semiarid environments. Thus, terracing has the potential to enhance sustainable vegetation restoration in water-limited regions.