Diverse practices related to livestock intensification often have a deep impact on grassland diversity. Moreover, alternative degraded states that are hardly reversible can be observed, resulting in low-diversity communities, dominated by invasive alien species. Therefore, the need arises to understand aboveground vegetation dynamics in these communities, and the potential of the seed bank to revert this degradation. In this study, we evaluated the impact of overseeding alien legumes coupled with phosphorus fertilization over natural grasslands, in terms of aboveground vegetation composition and soil seed bank. This was performed in a long-term experiment (23 years) in eastern Uruguay with three treatments:(1) native grasslands and native grasslands overseeded with alien legumes and fertilized at a (2) moderate or (3) high phosphorus dosage. Vegetation surveys were done in 2009 and 2019 to evaluate changes, and the seed bank was sampled in 2019. Native grasslands had higher total richness, native species richness and abundance for both years, as well as a higher species turnover in both temporal and spatial dimensions. The dominant species in overseeded treatments was the invasive alien grass Cynodon dactylon. The seed bank was similar between treatments in terms of seed density and richness, but differed in composition, with a higher abundance of alien species in the overseeded grassland. Seed banks showed low similarity with the aboveground vegetation. The overseeded grassland appears to be in a degraded state of low species diversity, with low turnover and invaded by alien species. The seeds in the soil appear to be insufficient to revert this condition and might be a hindrance for restoration due to the high abundance of alien species. Grasslands that have been degraded by long periods of fertilization and overseeding legumes present a great challenge for ecological restoration, since invasive alien species should be controlled before native species are reintroduced.