Abstract Transforming a shrubland into a dehesa system may be useful for recovering certain productive and regulatory functions of ecosystems such as grazing potential, soil erosion control, and also for reducing the risk of wildfire. However, the productivity of the herbaceous cover and tree development in the transformed system may be limited by soil fertility, especially after wildfire events. Previous studies have shown that adequate doses of sewage sludge may improve soil fertility and facilitate plant recovery, but few studies have focused on plant biodiversity assessment. Here, we compare the effects of sewage sludge that has undergone different post‐treatments (dewatering, composting, or thermal drying) as a soil amendment used to transform a fire‐affected shrubland into a dehesa , on tree growth and pasture composition (vegetation cover, species richness, and diversity). In the short term, sewage sludge causes changes in both pasture cover and tree growth. Although no major differences in vegetation species richness and composition have been detected, fertilization using sewage sludge was shown to modify the functional diversity of the vegetation community. Rapid replacement of shrubs by herbaceous cover and ruderal plants (e.g. Bromus hordeaceus and Leontodon taraxacoides ) and of the three grass species sown ( Festuca arundinacea , Lolium perenne , and Dactylis glomerata ) was observed, whereas N‐fixing species (leguminous) tended to be more abundant in nonfertilized soils and soils amended with composted sludge. These results indicate that sewage sludge modifies the functionality of vegetation when applied to soils, and that the response varies according to the treatment that the sludge has undergone.