Salt marsh and mangrove have been recognized as being among the most valuable ecosystem types globally in terms of their supply of ecosystem services and support for human livelihoods. These coastal ecosystems are also susceptible to the impacts of climate change and rising sea levels, with evidence of global shifts in the distribution of mangroves, including encroachment into salt marshes. The encroachment of woody mangrove shrubs and trees into herbaceous salt marshes may represent a substantial change in ecosystem structure, although resulting impacts on ecosystem functions and service provisions are largely unknown. In this review, we assess changes in ecosystem services associated with mangrove encroachment. While there is quantitative evidence to suggest that mangrove encroachment may enhance carbon storage and the capacity of a wetland to increase surface elevation in response to sea-level rise, for most services there has been no direct assessment of encroachment impact. On the basis of current understanding of ecosystem structure and function, we theorize that mangrove encroachment may increase nutrient storage and improve storm protection, but cause declines in habitat availability for fauna requiring open vegetation structure (such as migratory birds and foraging bats) as well as the recreational and cultural activities associated with this fauna (e.g., birdwatching and/or hunting). Changes to provisional services such as fisheries productivity and cultural services are likely to be site specific and dependent on the species involved. We discuss the need for explicit experimental testing of the effects of encroachment on ecosystem services in order to address key knowledge gaps, and present an overview of the options available to coastal resource managers during a time of environmental change.