Invasion of native habitats by exotic plants often causes reductions in faunal diversity. However, there is little direct evidence of native fauna actively avoiding invaded habitat and few quantitative studies on the mechanisms underlying such avoidance. We quantified alterations made to the composition and physical structure of an Australian tropical savanna by grader grass (Themeda quadrivalvis); an understudied invasive grass that is associated with reduced faunal abundance and diversity. We found that grader grass profoundly changed the physical structure and floral composition of tropical savanna, forming dense lawn-like monocultures unlike the native savanna. Second, we investigated the habitat preferences of small ectotherms in partially invaded habitat, using a rainbow skink (Carlia schmeltzii) as a model system and discovered that they actively avoided grader grass. Finally, we experimentally tested predictions regarding mechanisms that may have driven the avoidance of grader grass. Predation rates and food availability were not likely the cause of grader grass avoidance, because experiments using models deployed in the field showed that predation rates were higher in native grass, and collection of invertebrates in both habitats indicated that prey availability was similar. However, mesocosm experiments on habitat selection in relation to vegetation structure, along with field measures of available operative environmental temperatures, suggested that small ectotherms probably avoid grader-grass-invaded savanna due to a suboptimal thermal environment and lack of appropriate habitat structural heterogeneity.