Invasive plants are recognised as a major threat to biodiversity conservation worldwide. Despite this recognition, our understanding of the mechanisms controlling the invasion process and its impact on flora and fauna is often poor. We examined the impact of an invasive aquatic grass species, para grass (Urochloa mutica), on seasonally inundated wetlands in tropical northern Australia. Flora and avifauna were surveyed at sites invaded by para grass and in native vegetation. Spatial information systems were used to design surveys and determine environmental correlates of para grass distribution and so predict the potential future spread of para grass and infer impacts in the absence of control. Where para grass was present the median number of plant taxa was ~75% lower. Few birds showed preference for habitats invaded by para grass, and most birds were associated with areas of native vegetation or other habitats with little or no para grass. The study identified several wetland habitats that are at greater risk of invasion, based on the apparent habitat preferences of para grass. The degradation or loss of some of these ‘at-risk’ habitats, including Oryza meriodionalis grasslands that play an integral role in the wetland food chain, has important ramifications for the levels of biodiversity supported by the wetlands.