Two contiguous watersheds in the Loess Plateau in China that differed in the way their vegetation had been restored—afforestation or natural revegetation—differed in their consumption of soil moisture: the afforested watershed consumed more soil moisture, although the difference was significant only in wet years. Yet, both the afforestation and natural revegetation did not induce the soil desiccation in the study area. In the afforested watershed, soil moisture was depleted even beyond a depth of 100 cm, whereas in the grassland (natural revegetation), the depletion was confined to a layer less than 60 cm deep. Rainfall in the growing season accounted for 46–60% of the variation in soil moisture in the 0–60 cm layer in the grassland, but only 22–39% of that in the forest land. Overall, afforestation is the better option for the Loess Plateau only in areas where the annual rainfall is more than 500 mm. In any attempt at revegetation, the choice of tree species and planting densities should match the carrying capacity of the region’s water resources.