1. Recent forest expansion in Euro-Mediterranean countries predominantly results from secondary succession in abandoned farmland, rather than from artificial afforestation. This major forest transition involves the delivery of both ecosystem services and disservices, which must be balanced through new land-use planning and policy approaches. 2. Ecosystem services arising from this expansion of forests include increased carbon sequestration, water infiltration, provision of forest products, soil retention and forest coalescence. Nevertheless, ecosystem disservices such as reductions in water yield, landscape homogenisation, increased wildfire risk and/or the loss of high nature value managed habitats caution against generalisation of the benefits of such expansion. 3. Most EU funds related to forests are being allocated to conservation, restoration, or fire prevention and extinction efforts, whereas sustainable forest management and the maintenance of multifunctional agro-silvo-pastoral mosaics are hampered by the lack of financial incentives and by environmental regulations. 4. Policy implications. We advocate for more-targeted policies based on landscape planning that favours multifunctionality while reducing environmental and economic uncertainties and maximising the ecosystem service/disservice ratio. The following recommendations follow from this approach: (a) a climate-smart policy favouring fire-resistant landscapes and enhancing value chains that stimulate active forest management; (b) the adoption of a territorial perspective, beyond forest and farm-based measures and payments, that relies on management actions and minimises socio-ecological tensions; (c) refocusing CAP Pillar II grants from afforestation and forest protection measures to sustainable forest management; (d) transforming the CAP direct payments to support multifunctional farming systems (e.g. agroforestry); (e) a more balanced inclusion of different land uses in the Natura 2000 network and intensification of the support for High Nature Value farming in less-favoured areas.