Competitive interactions among bark beetle associated fungi are potentially influenced by abiotic factors. Water potential, in particular, undergoes marked changes over the course of beetle colonization of tree hosts. To investigate the impact of water potential on competition among three southern pine beetle associated fungi, Ophiostoma minus, Entomocorticium sp. A and Ceratocystiopsis ranaculosus, we utilized artificial media with water potentials of 0, −5, −10, and −20 MPa. Growth of all three fungi, when grown alone, decreased on media with lower water potentials. Growth rates of all three fungi were likewise reduced in competition experiments. At −5 to −10 MPa, C. ranaculosus (a fungus with beneficial effects toward southern pine beetle) was nearly equal in competitive ability to O. minus (a fungus with antagonistic effects towards southern pine beetle). This was not true on control media, nor at other water potentials tested. The range of water potentials used in our assays was similar to the range of water potentials we measured in loblolly pines within a southern pine beetle infestation. This study indicates that water potential may alter the outcome of competitive interactions among bark beetle-associated fungi in ways that favour bark beetle success.