With increasing salinity in irrigation areas, the option of tree planting in areas with shallow groundwater is seen as an ‘environmentally friendly’ alternative for controlling salinity. This study uses simulation modelling to investigate the long-term effects of planting Eucalyptus grandis in irrigated areas with shallow and saline watertables in the Riverine Plains where concerns exist about salinity effects on irrigated agriculture. APSIM, a 1-dimensional model of the soil–water–plant system, was modified to describe the interaction between the watertable within the plantation with the, normally shallower, watertable in the surrounding irrigated pasture. The model was tested against measured data and then used to simulate a range of different environmental conditions (depth and salinity of the groundwater, soil) and management options (irrigation with different amounts and salinity). The results of a total of 702 simulation runs helped to identify conditions in which irrigated plantations may be viable and how the irrigation of these plantations may be managed to decrease the impact of salinity on tree growth. The results indicated that if irrigation is to improve productivity, it must be in large amounts (1000 mm or more) and of good quality to have a significant effect on tree production. Irrigation with low salinity water (EC <2 dS/m) can only be used to reliably increase production in conditions where there are deeper watertables (4 m or deeper) on fast-draining soils. In these cases, flexible irrigation practices (scheduled irrigation) need to be employed in order to manage the salt levels within the tree root-zones. The viability of plantations is likely to decrease with increasing irrigation water salinity as salt accumulation in the profile reduces the ability of the trees to act as natural sinks. Depending on the irrigation and groundwater salinity, trees might be effective only up to a few years (as little as 9 years). Optimum response of trees to irrigation is only predicted with fresh water and scheduled irrigation (up to 1700 mm/year). However, if ample fresh water was available, other higher value cropping options are likely to be sought by land managers. Furthermore, the large amounts of water added to the plantation will have negative effects (water and salt export from the plantation) on the surrounding land, which will need further intervention to be sustainable.