AbstractAim Water and nutrient availability are major limits to productivity in semi‐arid ecosystems; hence, ecological restoration often focuses on conserving or concentrating soil resources. By contrast, nutrient enrichment can promote invasion by exotic annuals, leading to restoration approaches that target reduction of soil nutrients. We aimed to explore potential biodiversity trade‐offs between these approaches by investigating relationships among soil nutrients, exotic annuals and native plant diversity and composition. In particular, we investigated the hypothesis that native plant diversity in semi‐arid to temperate woodlands reflects the productivity–diversity hypothesis, leading to hump‐backed relationships with soil nutrients such that (1) native plant diversity declines with increasing nutrient enrichment and (2) native diversity is limited at the lowest levels of soil fertility.Location Fragmented, long‐ungrazed Eucalyptus loxophleba subsp. loxophleba (York gum)–Acacia acuminata (jam) woodlands in the wheatbelt of South‐Western Australia.Methods We conducted stratified surveys of floristic composition and topsoil nutrient concentrations in 112 woodland patches. We used generalized linear models, structural equation models and ordinations to characterize relationships among soil nutrients, rainfall, exotic annuals and patch‐scale (100 m2) native plant composition and diversity.Results Patch‐scale native plant diversity declined strongly with increasing exotic abundance. This was partly related to elevated soil nutrient concentrations, particularly total nitrogen and available phosphorus. By contrast, there was little evidence for positive correlations between soil nutrients and native diversity, even at very low soil nutrient concentrations.Main conclusions Minimizing weed invasions is crucial for maximizing native plant diversity in E. loxophleba woodlands and could include nutrient‐depleting treatments without substantially compromising the functional capacity of soils to maintain native plant richness and composition. More broadly we emphasize that understanding relationships among ecosystem productivity, plant diversity and exotic invasions in the context of associated theoretical frameworks is fundamental for informing ecological restoration.