To examine the hydraulic effect of vegetation, soil column experiments were used to investigate how alfalfa (Medicago sativa L.), the dominant grass species on the Chinese Loess Plateau, affects water content and suction dynamics of loess under rainfall and drought conditions, with emphasis on planting density and soil compaction. The results suggested that under rainfall conditions, the effect of planting density on water content and suction dynamics varied depending on soil compaction. During drought, water content in vegetated soils generally decreased with planting density, due to the increased water uptake by roots under high planting densities; as plant growth progressed, the differences caused by varying planting density diminished. Soil compaction generally positively correlated with water content, owing to the coupled effects of plant roots and soil compaction. In addition, numerical models were developed using Hydrus-2D to simulate water migration in soil columns and validated with experimental data. The close agreement between predicted and measured water content values demonstrated the feasibility of using Hydrus-2D to derive soil hydraulic properties through inverse modelling and to simulate water dynamics in vegetated soils.