Fine-scale vegetation cover is a common variable used to explain animal occurrence, but we know less about the effects of fine-scale vegetation heterogeneity. Theoretically, fine-scale vegetation heterogeneity is an important driver of biodiversity because it captures the range of resources available in a given area. In this study we investigated how bird species richness and birds grouped by various ecological traits responded to vegetation cover and heterogeneity. We found that both fine-scale vegetation cover (of tall trees, medium-sized trees and shrubs) and heterogeneity (of tall trees, and shrubs) were important predictors of bird richness, but the direction of the response of bird richness to shrub heterogeneity differed between sites with different proportions of tall tree cover. For example, bird richness increased with shrub heterogeneity in sites with high levels of tall tree cover, but declined in sites with low levels of tall tree cover. Our findings indicated that an increase in vegetation heterogeneity will not always result in an increase in resources and niches, and associated higher species richness. We also found birds grouped by traits responded in a predictable way to vegetation heterogeneity. For example, we found small birds benefited from increased shrub heterogeneity supporting the textual discontinuity hypothesis and non-arboreal (ground or shrub) nesting species were associated with high vegetation cover (low heterogeneity). Our results indicated that focusing solely on increasing vegetation cover (e.g. through restoration) may be detrimental to particular animal groups. Findings from this investigation can help guide habitat management for different functional groups of birds.