Forests and grasslands often form mosaics in subtropical regions such as in southern Brazil. Currently, we observe the processes of woody species encroachment and forest expansion over grasslands due to changes in climate conditions and disturbance regimes. Woody plants occurring across such mosaics can be specialists from one habitat type (forest or grassland) or a generalist species (those occurring in both of these contrasting habitats). Here, we explore if their occurrence in distinct habitats is coordinated by functional traits, considering both intra- and interspecific variability and phylogenetic relatedness between species, thereby assessing changes between habitats from the individual to the community scale. We surveyed forest and grassland vegetation forming mosaics in nine sites in southern Brazil. We found that grassland-forest communities do not differ in phylogenetic diversity, irrespective of considering or not the gymnosperms of the communities. Furthermore, forests presented lower diversity in leaf area than grasslands, with a predominance of large leaves but higher diversity of specific leaf area and leaf dry matter content, with leaves predominantly with an acquisitive resource strategy. When considering species with different habitat preferences, forest-specialist species showed traits related to resource acquisition, while grassland-specialist species showed trait values associated with resource conservation. Generalist species have trait values according to habitat occurrence, showing high intraspecific variability and trait plasticity to establish on both forest and grassland habitats. Assessing the trait variability from woody individuals is important to understanding the contrasting strategies used by different species in grassland-forest mosaics and can be essential to predict the dynamics of these ecosystems, given the changes in climate and disturbances regimes.