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Aim Ecological theory predicts that invasive ecosystem engineers like the American beaver ( Castor canadensis) in Tierra del Fuego ( TDF) affect landscape-level biodiversity and ecosystem function ( BEF) when engineered habitats are novel or extensive. We tested these hypotheses on freshwater BEF, sampling benthic habitat and macroinvertebrates in natural lotic (forest and grassland streams) and natural lentic habitats (bogs, lakes) and beaver-modified lentic ecosystems (active and abandoned ponds). Location Tierra del Fuego Archipelago (Chile and Argentina). Methods To determine effects on patch-scale BEF, we assessed two drivers: substrate diversity (H′) and benthic organic matter standing crop ( BOM, g m−2). Extent of impact was estimated as relative stream length (%) for each patch type in four 1000 ha images. Results The freshwater landscape was 56% free-flowing streams (natural lotic), 13% bogs and lakes (natural lentic) and 31% active and abandoned beaver ponds (beaver lentic). While engineering significantly modified lotic habitats (converting them to ponds), the beaver ponds were largely similar to natural lentic systems, but engineered lentic patches retained more BOM. While benthic biodiversity in beaver ponds was less than streams, the assemblage contained no habitat-specific taxa and was a subset of the natural lentic community. Main conclusions Invasive beavers engineer habitats whose biodiversity is similar to the landscape's natural lentic habitats, but by increasing the surface area and unit area retention of BOM via its impoundments, this invasion augments carbon standing stock approximately 72% in watersheds. While this invasion is considered the largest alteration to TDF's forested biome in the Holocene, here we discover that its impact is to ecosystem function, rather than biodiversity in the aquatic landscape. [ABSTRACT FROM AUTHOR]