Tree and grass species coexist in many ecosystems worldwide and support multiple ecosystem functions and services. However, the distribution of bacterial communities and factors driving coexistence in tree-grass associations and their ecosystem functions remain poorly understood. In this study, the distribution of soil bacteria and their link to changes in abiotic factors were investigated in adjacent montane grassland (C4 plants) and pine forest (bunya pine and hoop pine C3 plants) sites in the Bunya Mountains, subtropical Australia. Different vegetation (grassy balds and forest) had a substantial effect on terrestrial ecosystem properties, with higher levels of soil nutrients (e.g. total nitrogen (N), total phosphorus (P)) and electrical conductivity (EC), and lower δ13C values and pH under forests compared with grassland. Bacterial α-diversity (total species per operational taxonomic unit richness) did not differ between grassland and pine forest sites, whereas strong shifts in the bacterial community composition and structure were evident. Patterns in bacterial community structure were strongly associated with changes in soil pH, EC, total P and δ13C. Different bacterial groups associated with pine forest (Gammaproteobacteria and Alphaproteobacteria) and grassland (Acidobacteria and Verrucomicrobia) were identified as key groups contributing to the segregation of these two ecosystems in the Bunya Mountains. These findings suggest that heterogeneity in soil edaphic properties (e.g. key nutrients) likely contributed to variation in bacterial β-diversity of grassland and pine forest, which has potential implications for species coexistence and ecosystem function in montane eastern Australia.