QuestionsIn the alpine region of the Himalaya, shrubs play a vital role in maintaining the diversity and functional composition of associated herbaceous communities through competition–facilitation interactions under varying environmental stress conditions. In this study, we specified the following questions: (1) what is the mode of interaction between dominant shrubs and the associated herbaceous communities; (2) how do differences in resource availability between contrasting microhabitats mediate interactions between shrub and herbaceous communities; and (3) how do dominant shrubs influence the functional composition of herbaceous communities under the canopy as compared to ones in the open?Study areaAn alpine region of the western Himalaya, in India (32.24–33.15° N, 76.51–78.13° E).MethodsField studies were conducted to evaluate the canopy effects of alpine shrubs such as Caragana versicolor, Juniperus polycarpos and Rhododendron anthopogon on species richness, abundance and functional composition of coexisting herbaceous communities.ResultsThe dominant alpine shrubs of the western Himalaya exert competitive interactions with associated herbaceous communities and have low species richness and abundance under their canopies compared to open habitats. Further, contrary to expectations, competitive interactions were more prominent at higher elevations than at lower ones, especially for J. polycarpos and C. versicolor. Although the shrub undercanopies possessed richer soil nutrient pools, this did not contribute toward the facilitation of herbaceous species under the canopies. Moreover, herbaceous species under the canopies were found to exhibit resource‐acquisitive functional strategies, whereas those in the open were resource‐conservative.ConclusionsThe interaction between dominant alpine shrubs and the herbaceous community of the western Himalaya is competitive in nature, which influences species and functional composition and reorganizes herbaceous community assembly. Moreover, under future climate change scenarios the dominance of these shrubs will favour those herbaceous species that possess more competitive and resource‐acquisitive functional strategies.