Human‐mediated habitat transformation is increasingly evident around the world. Yet, how this transformation influences species’ niche width and overlap remains unclear. On the one hand, human‐mediated habitat transformation promotes increased species similarity through trait‐based filtering, and an increased prevalence of generalist species with broad niches, resulting in functional homogenization. On the other hand, species that colonize transformed habitats could use empty niches, resulting in decreased species similarity and an expansion of assemblage‐level niche space. Here we explore these two alternatives in eight highly diverse passerine assembles in natural, rural and urban habitats in South and Southwest China, a rapidly developing region of the world. Based on stable isotopes, we found that species’ niche width increased from natural to human‐made habitats, but there were no differences in niche overlap among habitats. Therefore, we found evidence for niche expansion, with generalists appearing to use empty niches created by human habitat modification, and with assemblages being comprised of complementary species. Further research is needed to determine whether increased between‐ or within‐individual niche variation is the main driver of niche expansion in transformed habitats.