Question: Does grazing by large herbivores affect species composition or community‐wide variation in plant functional traits?Location: Dune grasslands at the Belgian coast. Methods: Plant cover and soil data were collected in 146 plots that were randomly selected at 26 grazed and ungrazed grassland sites. Plant community composition was assessed by Detrended Correspondence Analysis and mean values of plant trait categories were calculated across the plots.Results: Differentiation of plant composition and community‐wide plant trait characteristics was largely determined by grazing, soil acidity and their interaction. In ungrazed situations, a clear floristic distinction appears between acidic (non‐calcareous) and alkaline (calcareous) grasslands. In grazed situations, these floristic differences largely disappeared, indicating that grazing results in a decrease of natural variation in species composition. At higher soil pH, a larger difference in plant community composition and community‐wide plant traits was observed between grazed and ungrazed plots. In ungrazed situations, shifts in plant functional traits along the acidity gradient were observed.Conclusions: Grazing is responsible for shifts in plant community composition, and hence a decrease in plant diversity among grasslands at opposing acidity conditions in coastal dune grasslands. Therefore, care should be taken when introducing grazing as a system approach for nature conservation in dune grasslands as it may eliminate part of the natural variation in plant diversity along existing abiotic gradients.