Forest dynamics are directly driven by multiple factors, including changes in understory grasses and small woody plants. Yet the dynamics of these small woody plants and grasses as well as underlying ecological forces are still not fully understood, particularly in evergreen forests. Here, we analyzed ten year (from 2003 to 2013) shifts in species importance values, diversity, habitat associations, and distributions of understory small woody plants and grasses (including herbs, herbal lianas and woody plants with diameter at breast height (DBH)< 1 cm) in a 5-ha subtropical forest plot in Baishanzu, Zhejiang, China. Results showed that the number of individuals decreased by 28.7% overall, 76.9% in herbal lianas, and 14.4% in seedlings or saplings of tree species. Species richness of shrubs and grasses decreased notably, while evenness decreased in small woody plant communities and increased in herb communities. Except for Lithocarpus brevicaudatus, Symplocos phyllocalyx, Stauntonia conspicua, Rubus fujianensis, whose importance values increased conversely, correlations between changes of importance values during the ten-years period and initial importance values were positive among erective shrub species and negative among species of other life forms. Shifts in species-habitat associations were complex, as the number of species with significant habitat-associations decreased during the ten year period, except for the increasing richness of species with positive gully associations. Only species diversity in steep slope habitats did not decrease significantly. These findings suggest the small woody plants and grasses of the Baishanzu evergreen forest have not yet reached climax status, and were developing to the climax over 2003 to 2013. Internal community-level processes, such as intraspecific and interspecific competitions, should be dominant factors that drive the forest dynamics.