<p>A global trend of woody plant encroachment (WPE) in terrestrial grasslands has been observed in subalpine and boreal moorlands. WPE may adversely affect moorland plant community diversity, which are crucial for supporting a range of ecosystem functions and services, including carbon sequestration and landscape aesthetics. Understanding the fundamental drivers of WPE progression and its impact on plant diversity and composition is a pressing issue for conservation. In this study, by using a time-for-space substitution approach, we aimed to identify the environmental factors driving the WPE specifically by non-moorland species and their effects on plant diversity and functional traits in the subalpine moorlands of Hakkoda Mountains, in Aomori prefecture, northern Japan. Our findings revealed that WPE was significantly affected by distance from the habitat edge, snow depth and soil moisture. WPE progressed in areas with shallower snow, lower soil moisture and those closer to the edge of the habitat. Furthermore, WPE was one of the important factors decreasing plant diversity and increasing the leaf height of encroached communities. These results suggested that species with more competitive traits for resources such as light and moisture could coexist with non-moorland woody species. Our results highlighted the significant association of WPE progression with snow depth, soil moisture, and distance from the edge, which consequently altered moorland plant diversity and functional trait composition.</p>