Background: Habitat loss and fragmentation have been argued to drastically alter the composition of tree assemblages inhabiting small forest fragments but the successional trajectory experienced by such edge-affected habitats remains controversial. Aims: Here we examine whether small fragments (3.4–91.2 ha) support seedling assemblages more similar to those in 10–70-year-old secondary forests than to those in mature forests, in order to infer to what extent fragments move toward early successional systems. Methods: Using 59 0.1-ha plots distributed in a fragmented landscape of Brazilian Atlantic forest, we evaluated species richness and functional and taxonomic composition of seedling assemblages in 20 small forest fragments, 19 stands of secondary forest and 20 stands of mature forests in the interior of an exceptionally large fragment (ca. 3500 ha). Results: Small fragments presented the least species-rich seedling assemblages (17.2 ± 5.7 species), followed by secondary (22.5 ± 5.3), and mature forest (28.4 ± 5.3). Small fragments had seedling assemblages with functional and taxonomic composition more similar to those in secondary than in mature forest. Small fragments had a greater relative richness and abundance of pioneer trees (ca. 40% more), vertebrate-dispersed (6–25%), and those bearing medium-sized seeds (30–70%), while large-seeded species and individuals were reduced (>50% decrement) in comparison to seedling assemblages in mature forest. Conclusions: By comparing seedlings across a wide range of successional habitats we offer evidence that small forest fragments are experiencing an alternative successional pathway towards an early-successional system with reduced plant diversity.