Diversity of subalpine semi-natural grasslands is threatened by both overgrazing and abandonment, resulting in degradation and woody plants encroachment, respectively. The effects of overgrazing, followed by a sharp decline of grazing are rarely assessed in uncontrolled conditions. We aimed at assessing plant species and functional diversity within the grass-dwarf shrub mosaic. Species abundance and selected plant functional traits (leaf, height, seed) were assessed within 16 m(2) plots in adjacent grass-dominated and low-cover dwarf shrub vegetation patches. Species-based and functional patterns were quantified by Simpson's diversity, Rao's quadratic entropy, the plot weighted mean of plant traits and analysed with nonmetric multidimensional scaling ordination and linear mixed-effect models. Despite the appearance of dwarf shrub canopy effect and light competition, higher species-based and functional diversity were found in the dwarf shrub patch. Our results point to the strong legacy of past overgrazing and the related filtering effects on the trait complex of assembling species, especially in the grass-dominated patches. We conclude that pastures incorporating dwarf shrubs at low cover are favourable in terms of species and functional diversity and recommend the maintaining of intermediate grazing intensity to support mosaic vegetation structures that are beneficial for biodiversity conservation in the study area.