Habitat loss and fragmentation are major threats to biodiversity, yet separating their effects is challenging. We use a multi-trophic, trait-based, and spatially explicit general ecosystem model to examine the independent and synergistic effects of these processes on ecosystem structure. We manipulated habitat by removing plant biomass in varying spatial extents, intensities, and configurations. We found that emergent synergistic interactions of loss and fragmentation are major determinants of ecosystem response, including population declines and trophic pyramid shifts. Furthermore, trait-mediated interactions, such as a disproportionate sensitivity of large-sized organisms to fragmentation, produce significant effects in shaping responses. We also show that top-down regulation mitigates the effects of land use on plant biomass loss, suggesting that models lacking these interactions—including most carbon stock models—may not adequately capture land-use change impacts. Our results have important implications for understanding ecosystem responses to environmental change, and assessing the impacts of habitat fragmentation.