Biological invasions drive biodiversity loss and ecosystem change on tropical islands. However, we know little about the implications of species losses on the functional structure of both resident and novel communities. Herein, we examined the potential effect of a non-native palm species, Pinanga coronata, on the taxonomic and functional assemblages of understory plant species in a Fijian rainforest. We predicted that competition from this invasive species would lead to trait convergence according to the competitive hierarchy hypothesis. Using a trait-based approach, we sampled plant communities in 280 plots across a gradient of P. coronata densities. We measured five functional traits, including height and leaf traits related to nutrient acquisition. We found that an increase in P. coronata density is strongly correlated with a decrease in taxonomic diversity (i.e., about − 50% for species richness and − 33% for Shannon diversity index) and a decrease in functional richness. Community-weighted mean values of traits of resident species (i.e., excluding P. coronata) converged toward competitive strategies such as higher leaf nitrogen content (LNC), lower carbon-to-nitrogen (C:N) ratios and leaf dry matter content (LDMC), a pattern that is significantly non-random for LDMC and C:N. This study demonstrates that P. coronata might act as a strong biotic filter responsible for species loss and functional changes. Our findings suggest that in response to increasing competition with this invasive plant, resident and novel plant communities shift toward less diverse and more competitive assemblages. Nevertheless, the intensity of this filtering is habitat dependent (e.g. less filtering effect under mahogany trees). Lastly, changes in resource acquisition strategies (mainly nutrient-based) in particular in low nutrient status of rainforest soils, could lead to long-term impacts on tree regeneration, in turn causing large-scale changes in ecosystem properties.