Tree plantations have become one of the fastest-growing land uses and their impact on biodiversity was evaluated mainly at the taxonomic level. The aim of this study was to analyze environmental changes after the Eucalyptus plantation in an area originally covered by natural grasslands, taking into account the alpha and beta (taxonomic and functional) diversity of plant communities. We selected nine plantation ages, along a 12 years chronosequence, with three replicates per age and three protected grasslands as the original situation. At each replicate, we established three plots to measure plant species cover, diversity and environmental variables. Results showed that species richness, and all diversity indices, significantly declined with increasing plantation age. Canopy cover, soil pH, and leaf litter were the environmental drivers that drove the decrease in taxonomic and functional diversity of plants through the forest chronosequence. Based on the path analyses results, canopy cover had an indirect effect on plant functional diversity, mediated by leaf litter depth, soil pH, and plant species richness. The high dispersal potential, annual, barochorous, and zoochorous plant species were the functional traits more affected by the eucalypt plantations. We recommend two management practices; reducing forest densities to allow higher light input to the understory and, due to the fact that leaf litter was negatively associated with all diversity facets, we recommend reducing their accumulation or generate heterogeneity in its distribution to enhance biodiversity.