The reed Phragmites australis Cav. is aggressively invading salt marshes along the Atlantic Coast of North America. We examined the interactive role of habitat alteration (i.e., shoreline development) in driving this invasion and its consequences for plant richness in New England salt marshes. We surveyed 22 salt marshes in Narragansett Bay, Rhode Island, and quantified shoreline development, Phragmites cover, soil salinity, and nitrogen availability. Shoreline development, operationally defined as removal of the woody vegetation bordering marshes, explained >90% of intermarsh variation in Phragmites cover. Shoreline development was also significantly correlated with reduced soil salinities and increased nitrogen availability, suggesting that removing woody vegetation bordering marshes increases nitrogen availability and decreases soil salinities, thus facilitating Phragmites invasion. Soil salinity (64%) and nitrogen availability (56%) alone explained a large proportion of variation in Phragmites cover, but together they explained 80% of the variation in Phragmites invasion success. Both univariate and aggregate (multidimensional scaling) analyses of plant community composition revealed that Phragmites dominance in developed salt marshes resulted in an almost three-fold decrease in plant species richness. Our findings illustrate the importance of maintaining integrity of habitat borders in conserving natural communities and provide an example of the critical role that local conservation can play in preserving these systems. In addition, our findings provide ecologists and natural resource managers with a mechanistic understanding of how human habitat alteration in one vegetation community can interact with species introductions in adjacent communities (i.e., flow-on or adjacency effects) to hasten ecosystem degradation.