Throughout eastern Australia, fragmentation and modification of eucalypt woodlands are causing declines in populations of woodland-dependent small passerines. Although agriculture is a major factor in these land use changes, development of peri-urban areas is also driving the simplification of habitat structure through removal of both native and weedy understorey species and the subdivision of remnant habitat. This study investigated the influence of habitat modification and fragmentation on birds in an urbanizing area of south east Queensland, Australia. The influence of spatial factors, such as surrounding vegetation cover, was considered alongside that of site-level habitat factors (vegetation structure) including interspecific competition from the noisy miner (Manorina melanocephala). Spatial factors did not influence the abundance and species richness of small passerines, a group of conservation concern. However, site-level factors, specifically shrub density and interspecific competition from the noisy miner, had a substantial influence on small passerine species richness and abundance. The density of shrubs (which consisted mainly of the introduced weed Lantana camara) had a strong positive relationship with small passerines while the abundance of noisy miners had a strong negative influence. Consequently, protection of vegetation with an intact shrub layer in this developing area is essential for many small birds of conservation significance. Removal of weedy understorey plants should be accompanied by replacement with native shrubs. The results of the study emphasize that factors other than the spatial distribution of vegetation in the landscape need to be considered in order to develop appropriate conservation strategies.