Abstract Under fire suppression, many tropical savannas transform into forests. Forest expansion entails changes in environmental variables and plant community structure. We hypothesized that forest expansion into savanna results in a shift in community‐weighted mean functional traits from stress tolerance to competitiveness, with generalist species having trait values intermediate between those of specialists of savanna and forest habitats. We studied 30 plots distributed over three savanna–forest boundaries undergoing forest expansion in the Brazilian Cerrado, capturing a gradient from open savanna to recently formed forest. We measured functional traits of 116 woody species of savanna specialist, generalist and forest specialist functional groups and quantified changes in species composition and mean traits across the basal area gradient. We identified two main axes of species traits. The first separated forest and generalist species from savanna specialists, with the latter possessing traits associated with resistance to disturbance and stress— such as thick leaves, thick bark, slower height growth and lower shade tolerance. Our second trait axis separated shrubs and understorey trees from pioneer species. Generalist species’ traits did not differ substantially from forest species, nor did they tend to have a typical pioneer strategy. Community‐weighted trait means changed linearly with forest development. There was a steady increase in traits associated with competitive dominance rather than stress tolerance and fire resistance, indicating a wholesale shift in the selective environment. Several of these patterns—for example, increasing height and decreasing light requirements—are common in old‐field succession. In contrast to old‐field succession, we found that SLA increased, leaf thickness decreased and wood density stayed constant. The assembly of forests appears to be shaped by environmental filters that contribute to a functional trajectory distinct from most other studied ecosystems. Our results highlight the importance of the functional composition of the early community and of the early colonizers of the open environment. Differences between savanna and forest specialists reflect the selective effects of the contrasting environments, while the traits of generalists—and their interaction with environmental filters—drive the dynamics of forest expansion. A free Plain Language Summary can be found within the Supporting Information of this article.