Austroeupatorium inulifolium has become a ferocious invader over the years in many ecosystems in the wet zone of Sri Lanka, including the grasslands of the Knuckles Conservation Area (KCA). Two field studies were conducted to assess the impacts of Austroeupatorium invasion on the diversity and composition of the plant communities. In the first study, three habitat categories were identified: less-invaded grassland (LIG), highly-invaded grassland (HIG) and the forest-grassland edge (FGE) adjacent to HIG. In the second study, two transects were selected that run across the FGE bordered by less or highly invaded grasslands (FGE-LIG and FGE-HIG). At each community, 5 linear quadrats (12 m x 3 m) were laid parallel to the FGE at different distances away from the edge to the forest interior and the open grassland. Each quadrate was further sub-divided into 3 quadrats. Three such transects were studied for each community. In both studies, the vegetation less than 2 m in height was enumerated. The stem density and abundance of Austroeupatorium were significantly higher in HIG and FGE compared to LIG. However, the plant community at FGE was less diverse than that of HIG and LIG. Tree saplings were observed only in the HIG, suggesting its favourable conditions for their establishment. The abundance of Austroeupatorium was markedly reduced towards the forest interior, suggesting that the FGE acts as a barrier against invasion towards the forest. The tree sapling abundance decreased from the forest interior towards the open grassland but the abundance was higher in transects bordered by HIG than by LIG. This suggests a facilitative effect on the forest tree regeneration potential under the Austroeupatorium canopy. The invasion may have led to improved micro-climatic and edaphic conditions and may also have facilitated the tree seedling establishment and survival in the forest interior as far as 10 m away from the FGE. Current findings depict positive impacts of Austroeupatorium-invaded grasslands on the forest regeneration process. Therefore, it is time to explore the positive effects of exotic species, especially when they colonize highly degraded landscapes, rather than generalizing that all invasive species cause detrimental impacts on every landscape.DOI: http://dx.doi.org/10.4038/cjsbs.v42i2.6607 Ceylon Journal of Science (Bio. Sci.) 42(2): 29-43, 2013