Non-riverine Eucalyptus camaldulensis (red gum) woodlands with herbaceous understoreys in southern Australia have been recognised as botanically significant due to their high small-scale species richness, but little is known about the factors that underpin these patterns. To examine the influence of local environmental variation (microsites) on small-scale vegetation patterns, we sampled vegetation under trees, away from trees, and in depressions and hummocks in three herb-rich woodlands. Trees influenced both the composition and richness of the ground-layer vegetation, with reductions in species richness found under trees in sites where incident light availability was reduced by >40%. Species composition and richness differed between microsites, indicating that spatial heterogeneity is an important factor affecting species distribution patterns. Patchiness in relation to abiotic factors creates environmentally and compositionally distinct patterns. Indicator species analysis found that all microsites could be distinguished by character species with some evidence for microsite limitation for only a few species, lending weak support for a niche-based model of community assembly for herb-rich woodlands. A more plausible explanation for extremely high small-scale species richness is the lack of dominant species in these low productivity woodlands.