Deforestation and forest degradation are among the main biodiversity loss drivers worldwide. The expansion of productive activities, such as forest plantations, often results in the loss and degradation of native forests, affecting native species in many ways. While many studies have assessed the effects of habitat degradation on taxonomic diversity, the effects on functional diversity have been little explored. Functional diversity provides a robust framework for understanding how anthropogenic disturbance changes biodiversity. We assessed how bird functional diversity changes along a habitat degradation gradient in the Valdivian rainforests (southern Chile). We used four functional diversity indices and compared four habitat types (old-growth, secondary, and logged native forests and exotic plantations) to assess how functional diversity changes depending on habitat structure and bird life history, and behavioral traits. We found that most functional diversity differences occur between old growth and secondary native forests, being the latter the less functionally diverse habitat. Further, secondary forests lack natural tree cavities, and birds nesting there are more prone to be affected by brood parasitism. Changes in habitat structure seem to be determinant for bird functional diversity along a habitat degradation gradient. Therefore, habitat degradation can lead to functional homogenization beyond changes in species richness or abundance, with less evident ecological consequences.