We analysed patterns of species, traits and functional diversity (FD, Rao’s quadratic entropy) in relation to environmental variables and management type. We found that soil water availability on a fine scale determines FD and direction of trait response after grazing cessation. In plots with bare soil and lower water availability values, species and trait composition were less affected by abandonment. Instead, we observed a shift from strategies devoted to grazing resistance to those devoted to competition for light after grazing cessation at intermediate water availability. Grazing cessation decreased the overall FD, however in both the harsher and more productive conditions grazed and abandoned systems did not show significant differences. Instead, in intermediate conditions we documented significant differences in FD of many trait states, especially those related to resource acquisition and space occupation. Thus, our results indicate that the level of soil water resources determines the net effect of disturbance on the FD of grassland communities