AbstractCompared to tree responses to elevated (e)CO2, little attention has been paid to understorey plant community responses in forest ecosystem studies, despite their critical role in nutrient cycling and the regeneration of overstorey species. Here, we present data on understorey responses from a 3‐year Free‐AirCO2Enrichment experiment in a native, phosphorus‐limitedEucalyptuswoodland in Australia (EucFACE).We conducted repeat surveys of the understorey plant community from 2012 to 2016, recording cover at the species level.Three years ofeCO2significantly decreased the diversity (Shannon‐Weaver; −30%) and species richness (−15%;c. −1 species per 4 m2plot) of graminoid species, and the cover of C4graminoids in both dominant (−38%) and subordinate (−48%) groups, relative to ambient conditions, leading to a significantly lower graminoid C4:C3ratio (−59%) in the understorey plant community. The ratio of C4:C3graminoids was negatively associated with soil nitrogen (N) availability suggesting that previously reportedeCO2‐associated increases in N availability may contribute to (or be a consequence of) shifts in the composition of the graminoid community at the study site. There was, however, no effect ofeCO2on the diversity of forb species, which represented the most species‐rich functional group but onlyc. 1% of the understorey biomass.Synthesis. Our results suggest thateCO2influences competition between C4and C3graminoid species both directly and indirectly via increasing N availability. The shift towards lower C4:C3ratios and enhanced dominance by C3species with their generally higher tissue N concentrations could further change soil nutrient availability and potentially accelerate community succession. Thus,eCO2has altered the diversity and composition of the understorey plant community in this woodland, with the potential for cascading consequences for trophic interactions and ecosystem function.