Alien plant invaders frequently reduce biodiversity of native communities, but the mechanisms of impact remain poorly understood. We used the seedling emergence method to assess impacts of invasion by an alien, clonal grass (Stenotaphrum secundatum) on endangered coastal swamp forest seed banks of eastern Australia. We asked: do impacts vary amongst native plant growth forms and dispersal strategies, and are impacts driven by propagule or recruitment limitation? Invasion was associated with significant reductions in seed bank species richness and increased dissimilarity between the seed bank and standing vegetation. The rate of species loss was more than two times greater within the standing vegetation than seed bank, however, indicating that the primary mechanism of community change is limited recruitment from the seed bank rather than a reduction in the arrival and storage of propagules to invaded sites. Overall, species losses were observed for herbs, graminoids and vertebrate-dispersed species, whilst wind and water dispersed and woody species were unaffected by invasion. Overall, seed banks were substantially richer than the standing vegetation across both invaded and non-invaded sites, indicating a high potential for unassisted reestablishment of a species-rich standing vegetation from the seed bank following S. secundatum removal, although one unlikely to resemble the original community in structure, function and identity of species. Differential impacts across functional groups may result in regenerating communities relatively dominated by woody species, which may prevent subsequent recolonisation by herbs and graminoids. Monitoring will be required to identify whether these and other species require assisted reintroduction.