Stock grazing has degraded many riparian ecosystems around the world. However, the potential for ecosystem recovery following the removal of grazing stock is poorly known. We developed a conceptual model to predict the responses of native and exotic herbaceous plants to grazing exclusion, based on site productivity and the degree of initial vegetation degradation. The effects of excluding grazing stock on richness, cover and composition of herbaceous plants were examined over 12 years in the degraded understorey of a riparian forest in Gulpa Island State Forest in south-eastern Australia. We predicted that grazing exclusion would lead to limited changes in vegetation cover, richness and composition, owing to presumed low site productivity and the high degree of understorey degradation. Results showed that the cover, richness and composition of native and exotic species varied significantly amongst years. Over all plots, regions and years, total cover was slightly but significantly lower in grazed than ungrazed plots (43.4% vs 50.8%). Whilst the cover of native plants increased over time in both treatments, the rate of increase was slightly greater in ungrazed plots. Grazing exclusion had no effect on the richness of native or exotic species, but had a significant but minor impact on plant composition, with different common species (mostly exotics) being promoted or diminished in ungrazed plots. The composition of grazed and ungrazed areas did not become more different over time. Overall, the effects that could be attributed to grazing exclusion were relatively minor and transient. Results are consistent with predictions based on site productivity and initial degradation, and should not be extrapolated to other more productive, or less degraded, riparian systems.