AbstractClimate change causes marine species to shift and expand their distributions, often leading to changes in species diversity. While increased biodiversity is often assumed to confer positive benefits on ecosystem functioning, many examples have shown that the relationship is specific to the ecosystem and function studied and is often driven by functional composition and diversity. In the northwestern Gulf of Mexico, tropical species expansion was shown to have increased estuarine fish and invertebrate diversity; however, it is not yet known how those increases have affected functional diversity. To address this knowledge gap, two metrics of functional diversity, functional richness (FRic) and functional dispersion (FDis), were estimated in each year for a 38‐year study period, for each of the eight major bays along the Texas coast. Then, the community‐weighted mean (CWM) trait values for each of the functional traits are calculated to assess how functional composition has changed through time. Finally, principal component analysis (PCA) was used to identify species contributing most to changing functional diversity. We found significant increases in log‐functional richness in both spring and fall, and significant decreases in functional dispersion in spring, suggesting that although new functional types are entering the bays, assemblages are becoming more dominated by similar functional types. Community‐weighted trait means showed significant increases in the relative abundance of traits associated with large, long‐lived, higher trophic level species, suggesting an increase in periodic and equilibrium life‐history strategists within the bays. PCA identified mainly native sciaenid species as contributing most to functional diversity trends although several tropical species also show increasing trends through time. We conclude that the climate‐driven species expansion in the northwestern Gulf of Mexico led to a decrease in functional dispersion due to increasing relative abundance of species with similar life‐history characteristics, and thus the communities have become more functionally homogeneous.