Woody, evergreen shrublands are the archetypal community in mediterranean‐type ecosystems, and these communities are profoundly changed when they undergo vegetation‐type conversion (VTC) to become annual, herb‐dominated communities. Recently, VTC has occurred throughout southern California chaparral shrublands, likely with changes in important ecosystem functions. The mechanisms that lead to VTC and subsequent changes to ecosystem processes are important to understand as they have regional and global implications for ecosystem services, climate change, land management, and policy. The main drivers of VTC are altered fire regimes, aridity, and anthropogenic disturbance. Some changes to ecosystem function are certain to occur with VTC, but their magnitudes are unclear, whereas other changes are unpredictable. I present two hypotheses: (1) VTC leads to warming that creates a positive feedback promoting additional VTC, and (2) altered nitrogen dynamics create negative feedbacks and promote an alternative stable state in which communities are dominated by herbs. The patterns described for California are mostly relevant to the other mediterranean‐type shrublands of the globe, which are biodiversity hotspots and threatened by VTC. This review examines the extent and causes of VTC, ecosystem effects, and future research priorities.