Questions: Perching and nursing effects drive initial steps of forest expansion over grasslands. Nursing effect is obviously related to niche mechanisms, while perching effect is likely to result both from neutral and niche factors. This study assessed the effect of neutral and niche factors on species composition in sapling communities developing beneath isolated trees/shrubs (ITS) in grassland.Location: A mosaic of Campos grassland and Araucaria forest in São Francisco de Paula, southern Brazil (29°28′S, 50°13′W).Methods: We described sapling communities beneath 32 ITS using mean number of forest woody saplings of different species. We performed a stepwise canonical correspondence analysis (CCA) to select ITS traits that maximized the association with species composition. Then we evaluated the contribution of distance from seed source, ITS traits and distance-structured ITS traits on sapling community assembly using a variation partitioning method based on CCA and partial CCA.Results: Sapling species composition was significantly explained by ITS traits (ITS dispersal mode, ITS growth form, crown area:ITS height ratio, crown area, ITS height and crown area:volume ratio). Distance from seed sources explained only a minor, non-significant fraction of sapling species composition. Distance-structured trait variation was negligible.Conclusions: Sapling community assembly beneath ITS was mostly explained by niche factors related to both nursing and perching effects. Dispersal limitation explained only a small fraction of variation in species composition beneath ITS, suggesting that neutral-based perching effect had a minor role in community assembly.