To understand the dynamics of ecosystem carbon cycling, CO2 fluxes were measured over and under an oak–grass savanna and over a proximate grassland in California. The measurements were made from 2000 to 2006 using the eddy covariance technique. Annual net carbon exchange (NEE) ranged from −155 to −56 gC m−2 year−1 and from −88 to 141 gC m−2 year−1 at the savanna and nearby grassland, respectively. Inter-annual variability in NEE was significantly related to length of growing season for the savanna, grassland, and tree canopy. We partitioned the NEE into two separate terms—primary productivity (GPP) and respiration (ecosystem respiration, Reco)—and found that the GPP and Reco of the savanna and grassland depended primarily on the amount of seasonal precipitation that occurred while grass and tree canopies were simultaneously active rather than depending on annual precipitation. We also found that NEE was greatly constrained by both Reco and GPP and Reco was significantly constrained by GPP. Reco increased by 79 gC m−2 year−1 with each 100 gC m−2 year−1increase in GPP. In addition, measuring CO2 exchange separately in the overstory and understory of the savanna over multiple years enabled us to partition Reco into heterotrophic and autotrophic respiration terms in a new and direct way. The sensitivity of Reco to GPP (dReco/dGPP) and the baseline of respiration terms both provide useful tools for understanding the dynamics of ecosystem CO2 uptake under current conditions of climate and ecosystem succession stage.