The Neotropical region has been subjected to massive urbanization, which poses high risks for some global biodiversity hotspots and losses of ecosystem functions and services. In this study, we investigate how distance from large patches of native forests (source areas) and vegetation (green)/and infrastructure (gray) characteristics affect bird species richness and functional diversity in São Paulo megacity, southeastern Brazil. We analyzed the effects of source areas and green/gray characteristics on species richness and functional diversity (richness, evenness, and divergence) indices. We detected 231 bird species, and our data confirmed our predictions: (1) bird species richness in urbanized habitats was found to be (~ 50–85%) lower than in source habitats; (2) species richness and trait composition significantly decreased as the distance from the source area increased, while functional richness was not affected by this metric; and (3) shrub and herbaceous covers and maximum height of trees were positively correlated with species richness and unique functional traits regarding habitat, diet, foraging and nesting strata and dispersal ability of birds in the forest-urban matrix. The number of buildings was negatively correlated with bird species richness and functional richness. Maximum height of buildings caused dramatic declines in functional evenness. Functional divergence was notably lower in sites with high shrub cover. Our study stresses the complexity of vegetation embedded in large Neotropical urban settlements and the need to maintain large protected areas surrounding megacities to mitigate the impacts of urbanization on birds.