QUESTIONS: What are the effects of replacing mixed species natural forests with Cryptomeria japonica plantations on understorey plant functional and species diversity? What is the role of the understorey light environment in determining understorey diversity and community in the two types of forest? LOCATION: Subtropical northeast Taiwan. METHODS: We examined light environments using hemispherical photography, and diversity and composition of understorey plants of a 35‐yr C. japonica plantation and an adjacent natural hardwood forest. RESULTS: Understorey plant species richness was similar in the two forests, but the communities were different; only 18 of the 91 recorded understorey plant species occurred in both forests. Relative abundance of plants among different functional groups differed between the two forests. Relative numbers of shade‐tolerant and shade‐intolerant seedling individuals were also different between the two forest types with only one shade‐intolerant seedling in the plantation compared to 23 seedlings belonging to two species in the natural forest. In the natural forest 11 species of tree seedling were found, while in the plantation only five were found, and the seedling density was only one third of that in the natural forest. Across plots in both forests, understorey plant richness and diversity were negatively correlated with direct sunlight but not indirect sunlight, possibly because direct light plays a more important role in understorey plant growth. CONCLUSIONS: We report lower species and functional diversity and higher light availability in a natural hardwood forest than an adjacent 30‐yr C. japonica plantation, possibly due to the increased dominance of shade‐intolerant species associated with higher light availability. To maintain plant diversity, management efforts must be made to prevent localized losses of shade‐adapted understorey plants.