Background and aims <p>Shrub encroachment alters ecosystem functions. Yet, changes in plant community traits and soil properties along succession from grassland to shrubland in European mountains are poorly understood.</p> Methods <p>We used a trait-based approach to investigate the indirect effects of shrubs from community weighted means (CWM) of plant traits to soil properties along a gradient of encroachment in subalpine grasslands at two sites in the Alps. We hypothesized that increasing shrub density shifts plant communities towards more conservative traits, which nonlinearly increases carbon sequestration and impacts nutrient cycling. We tested our hypothesized model of indirect effects using structural equation models, which accounted for biomass allocation to leaves and stems in CWM calculations.</p> Results <p>As expected, CWM dry matter content (DMC) increased and CWM of nitrogen (N) and phosphorus (P) decreased with increasing shrub biomass. Increasing CWM DMC resulted in increasing soil C:N ratio and soil organic matter (SOM) concentration, and decreasing pH. Decreasing CWM P resulted in decreasing soil available P, but changes in CWM N had no effect on available N. There was no indication of nonlinear changes.</p> Conclusion <p>This study demonstrates that with shrub encroachment plant communities gradually become more conservative with tougher and nutrient-poor tissues, which leads to soil acidification, SOM accumulation and lower P availability. We also demonstrate that DMC, an easy measurable trait, is a sufficient indicator for effects of plant tissue quality on soils of shrub encroached subalpine grasslands and could be used in future trait-based models, allowing projections under climate change scenarios.</p>