The drastic loss of seminatural grasslands and the decrease in species diversity in Europe during the 20th century are closely linked to social-economic factors. Development in agricultural production drives land-use changes, and thus controls the capacity of landscapes to maintain biodiversity. In this study, we link agricultural production changes to landscape fragmentation and species diversity. Our results show that the termination of grazing on seminatural grassland caused significant changes in landscape structure and a decline in the number of vascular plant species. The decline of grazed grasslands has been driven mainly by farm-level economic efficiency and profitability interests, which have been connected with agricultural policy measures. Since 1995, when Finland joined the European Union, the area of grazed patches in our study area has again increased as a result of a support scheme for the management of seminatural grasslands.