Herbivore exclusion is implemented globally to recover ecosystems from grazing by introduced and native herbivores, but evidence for large‐scale biodiversity benefits is inconsistent in arid ecosystems. We examined the effects of livestock exclusion on dryland plant richness and reproductive capacity. We collected data on plant species richness and seeding (reproductive capacity), rainfall, vegetation productivity and cover, soil strength and herbivore grazing intensity from 68 sites across 6500 km2 of arid Georgina gidgee (Acacia georginae) woodlands in central Australia between 2018 and 2020. Sites were on an actively grazed cattle station and two destocked conservation reserves. We used structural equation modelling to examine indirect (via soil or vegetation modification) versus direct (herbivory) effects of grazing intensity by two introduced herbivores (cattle, camels) and a native herbivore (red kangaroo), on seasonal plant species richness and seeding of all plants, and the richness and seeding of four plant groups (native grasses, forbs, annual chenopod shrubs, and palatable perennial shrubs). Non‐native herbivores had a strong indirect effect on plant richness and seeding by reducing vegetative ground cover, resulting in decreased richness and seeding of both native grasses and forbs. . Herbivores also had small but negative direct impacts on plant richness and seeding. This direct effect was explained by reductions in annual chenopod and palatable perennial shrub richness under grazing activity Responses to grazing were herbivore‐dependent – introduced herbivore grazing reduced native plant richness and seeding, while native herbivore grazing had no significant effect on richness or seeding of different plant functional groups. Soil strength decreased under grazing by cattle but not camels or kangaroos. Cattle had direct effects on palatable perennial shrub richness and seeding, whereas camels had indirect effects, reducing richness and seeding by reducing the abundance of shrubs. We show that considering indirect pathways improves evaluations of the effects of disturbances on biodiversity, as focusing only on direct effects can mask critical mechanisms of change. Our results indicate substantial biodiversity benefits from excluding livestock and controlling camels in drylands. Reducing introduced herbivore impacts will improve soil and vegetation condition, ensure reproduction and seasonal persistence of species, and protect native plant diversity.This article is protected by copyright. All rights reserved.