Temperate grassy woodlands were once widespread and dominant in many agricultural regions of south-eastern Australia. Most are now highly degraded and fragmented and exist within a context of broadscale landscape degradation. Greater understanding of natural processes in these woodlands is needed to benchmark management and restoration efforts that are now critical for their ongoing survival. We studied physical and chemical properties of topsoils from rare, little-grazed remnants of grassy Eucalyptus albens Benth. and E. melliodora Cunn. ex Schauer woodlands in central New South Wales and examined natural patterns in topsoil properties and understorey flora in relation to trees and canopy gaps. Topsoils were generally low in available macronutrients (nitrogen, phosphorus and sulfur), but were favourable for plant growth in most other measured characteristics. Topsoils beneath trees were notably more fertile than in open areas, particularly in total carbon, total nitrogen, available phosphorus, available potassium and salinity. Higher nutrient concentrations, particularly of available phosphorus, may have contributed to patterns in understorey dominants, with Themeda australis (R.Br.) Stapf predominating in open areas and Poa sieberiana Spreng. beneath trees. Trees were also associated with a higher native-plant richness, possibly resulting from their influence on the competitive dynamics of the dominant grasses. We discuss the implications of these interactions for the use of burning, grazing and slashing in woodland management and re-establishment of native grasses and trees in restoration efforts.