During the last 50 years, the distribution and abundance of many European butterfly species associated with semi-natural grasslands have declined. This may be the result of deteriorating habitat quality, but habitat loss, resulting in decreasing area and increasing isolation of remaining habitat, is also predicted to result in reduced species richness. To investigate the effects of habitat loss on species richness, we surveyed butterflies in semi-natural grasslands of similar quality and structure, but situated in landscapes of different habitat composition. Using spatially explicit habitat data, we selected one large (6-10 ha) and one small (0.5-2 ha) grassland site (pasture) in each of 24 non-overlapping 28.2 km(2) landscapes belonging to three categories differing in the proportion of the area that consisted of semi-natural grasslands. After controlling for local habitat quality, species richness was higher in grassland sites situated in landscapes consisting of a high proportion of grasslands. Species richness was also higher in larger grassland sites, and this effect was more pronounced for sedentary than for mobile species. However, the number of species for a given area did not differ between large and small grasslands. There was also a significant relationship between butterfly species richness and habitat quality in the form of vegetation height and abundance of flowers. In contrast, butterfly density was not related to landscape composition or grassland size. When species respond differently to habitat area or landscape composition this leads to effects on community structure, and nestedness analysis showed that depauperate communities were subsets of richer ones. Both grassland area and landscape composition may have contributed to this pattern, implying that small habitat fragments and landscapes with low proportions of habitat are both likely to mainly contain common generalist species. Based on these results, conservation efforts should aim at preserving landscapes with high proportions of the focal habitat.