Anthropogenic habitat alteration has the capacity to alter the distribution of species. Capybara (Hydrochoerus hydrochaeris) are a widely distributed rodent throughout most of South America, but are restricted to areas of standing water. As the Gran Chaco ecosystem of Paraguay is converted from dry tropical forest to pastureland, we hypothesize that this alteration creates potential for invasion by capybara into newly fragmented areas. We surveyed throughout the Chaco to estimate the distribution of capybara, and we collected noninvasive genetic samples. We used ecological niche modeling based on six environmental or climatic variables, and we modeled both the current distribution of capybara and the distribution of capybara 80 years ago. We then verified the hypothesized demographic signal generated with our model using phylogeographic analyses of 386 bp of the mtDNA control region. Comparison of present and past models suggested that populations expanded into the Gran Chaco after forest was converted to pastureland. Analyses of the mitochondrial D-loop supported the rapid range expansion scenario. We also found evidence of secondary contact of two distinct phylogroups which had previously been disjunct. Anthropogenic land transformation appeared to be a major factor influencing the distribution, as predicted by the niche model and confirmed by genetic data. Habitat modification altered connectivity of populations across the landscape. In addition, long separated clades of capybara are now admixed throughout the Paraguayan Chaco. The invasion of a large bodied herbivore into the High Chaco region may exacerbate the degradation of forest and prevent forest regeneration. As the reservoir host of several zoonotic diseases, the expansion and contact of two previously disjunct capybara populations has implications for disease emergence.