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Functional diversity is expected to decrease following land conversion. Empirically, however, the consequences of such changes are highly variable. One possible explanation is that the magnitude and direction of functional diversity change depends on how agricultural land conversion interacts with the original determinants of community assembly (e.g., temperature and elevation gradients). We compared the functional structure of 50 Anolis lizard communities on the island of Hispaniola in both forested and deforested habitats along an elevation gradient, as elevation often determines community composition. We used morphological measurements of body size, limb and tail length, and toepad width to capture ecomorphological aspects of functional diversity. These traits are strongly linked to habitat use which has been shown to be the primary axis of niche partitioning in anoles. We found that deforestation had little effect on functional (morphological) richness at low elevations but increased functional richness and evenness at high elevations, where natural communities are depauperate due to thermal constraints. Simultaneously, deforestation reduced spatial turnover and eliminated morphologically peripheral species. These results suggest that how land conversion affects communities depends on whether it relaxes or reinforces a community’s dominant environmental filters: at high elevations, as deforestation increases daytime temperatures, the filters that typically shape these communities are relaxed, allowing them to functionally resemble low elevation communities. While this enriches high-elevation communities, it also removes morphologically unique species and homogenizes diversity across elevations. Our results highlight that how land conversion reorganizes the functional structure of a community depends on that community’s environmental context.