Semi-arid ecosystems offer very limited resources to plants, but they are inhabited by incredibly diverse communities of winter annual plants. Ecological theory suggests that a high degree of specialization in resource use and in interactions among plants and soil fungi may explain the coexistence of ecologically similar species in such diverse communities. Species-specific variation in net outcome (positive vs negative) of plant-soil fungi interactions, may lead to variation in mean fitness differences thus increasing opportunities of coexistence. Few studies tested how resources (water and nutrients) in combination with soil fungi affect plants’ fundamental niche across life stages. We experimentally tested germination and fitness differences under different combinations of water, nutrients and soil fungi treatments, using six winter annual species with different degrees of mycorrhizal dependence. Germination success of four out of six species was reduced by the absence of soil fungi, and this response was more severe for obligate mycorrhizal species. Presence of soil fungi ameliorated the production of plant biomass especially under limited water or nutrients, corroborating findings that beneficial interactions with soil fungi alleviate abiotic stress. This response was strong in mycorrhizal dependent species, but highly variable among non-mycorrhizal species, likely due to species-specific outcomes of interactions among plants and pathogenic fungi. We suggest that absence of important symbionts may reduce germination and increase seed dormancy, thus favoring temporal niche partitioning among species, while the net outcomes of plant-soil fungi interactions may reduce mean fitness differences favoring coexistence via equalizing processes.