The loss of grasslands in southeastern South America has negatively affected grassland birds, leading to marked declines in their populations. However, the extent to which habitat transformation impacts on their reproductive performance, and whether the magnitude of these effects may be modulated by landscape matrices, is unknown. We assessed the effect of fragmentation on grassland bird reproduction by comparing the combined influence of fragmentation and landscape matrix on nesting success, brood parasitism and productivity of the Spectacled Tyrant Hymenops perspicillatus and the Brown‐and‐yellow Marshbird Pseudoleistes virescens. Surveys were undertaken in small grassland patches embedded within different landscape matrices (urban and agro‐ecosystem) and in a large patch within a reserve. Reproductive performance was adversely affected by fragmentation. However, these effects were conditioned by matrix type, and the response was not the same for the two species. For Brown‐and‐yellow Marshbird, fragmentation resulted in higher rates of brood parasitism and lower productivity regardless of the matrix type, whereas for Spectacled Tyrant, we found a negative effect only in an agricultural matrix. The lack of extensive grasslands makes small patches important; however, knowing the effects of different matrix types is critical to predicting the conservation value of grassland patches, and the response of different species is not uniform.