In lower-montane ecosystems of Ecuador, Setaria sphacelata (foxtail grass), the predominant introduced pasture species, forms a tussock grassland that reduces soil nitrogen and resists recolonization of forest vegetation. We compared the influence of individual trees or small clusters of nitrogen-fixing (Inga sp., Fabaceae) and non-nitrogen-fixing trees (Psidium guajava L., guava) on the soil and abiotic conditions that affect further regeneration of forest vegetation within pastures. Pasture trees ameliorated air temperature and light intensity to levels similar to those in adjacent intact forest. Beneath Inga, soil NO3−-N was four times higher than in open pasture. Nitrification was five times higher under Inga canopies than in open pastures for both field and laboratory incubations. This suggests that the increased soil N transformations under Inga are derived mainly from improved soil rather than microenvironmental conditions. Psidium canopies slightly increased field nitrification but had no effect under laboratory conditions. We also compared the natural abundance 13C signature and the carbon and nitrogen content of subcanopy soil with adjacent open pasture soil. Inga increased the C and N content of the upper 5 cm of soil and increased by 7% the fraction of soil organic matter derived from C3 plants. The improved soil and abiotic conditions beneath the canopies of N-fixing pasture trees favor the establishment and growth of woody montane species, suggesting that these trees could be used to accelerate forest regeneration within abandoned pastures.