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The physical and biotic environment is often considered the primary driver of functional variation in plant communities. Here, we examine the hypothesis that spatial isolation may also be an important driver of functional variation in plant communities where disturbance and dispersal limitation may prevent species from occupying all suitable habitats. To test this hypothesis, we surveyed the vascular plant composition of 30 islands in the Gulf of Maine, USA, and used available functional trait and growth form data to quantify the functional composition of these islands. We categorized species based on dispersal mode and used a landscape metric of isolation to assess the potential role of dispersal limitation as a mechanism of isolation‐driven assembly. We tested for island and species level effects on functional composition using a hierarchical Bayesian framework to better assess the causal link between isolation and functional variation. Growth form composition and the community mean value of functional traits related to growth rate, stress tolerance, and nutrient use varied significantly with island isolation. Functional traits and growth forms were significantly associated with dispersal mode, and spatial isolation was the strongest driver of primary trait variation, while island properties associated with environmental drivers in our system were not strong predictors of trait variation. Despite the species‐level association of dispersal mode and functional traits, dispersal mode only accounted for a small proportion of the overall isolation effect on community‐level trait variation. Our study suggests that spatial isolation can be a key driver of functional assembly in plant communities on islands, though the role of particular dispersal processes remains unclear.