SUMMARYThe loss of biodiversity in transitional forests between the Cerrado and Amazonia, the two largest neotropical phytogeographic domains, is an issue of great concern. This extensive region is located within the ‘arc of deforestation’ zone where tropical forests are being lost at the fastest rate on the planet, but floristic diversity and variation among forests here is still poorly understood. We aimed to characterize the floristic composition of forests in this zone and explored the degree and drivers of differentiation within and across Araguaia and Xingu watersheds. In 10 sites we identified all trees with diameter ≥10 cm; these totaled 4944 individuals in 257 species, 107 genera and 52 families. We evaluated the data for multivariate variation using TWINSPAN and DCA to understand the species distribution among sites. There was a larger contribution from the Amazonian flora (169 species) than that of the Cerrado (109) to the transitional forests. Remarkably, 142 species (55%) were restricted to only one sampling site, while 29 species (>16%) are endemic to Brazil, suggesting potentially large loss of species and unique forest communities with the loss and fragmentation of large areas. Our results also suggest that watersheds may be a critical factor driving species distribution among forests in the Amazonian–Cerrado transition zone, and quantifying their role can provide powerful insight into devising better conservation strategies for the remaining forests.