Anthropogenic environmental changes in climate, land use and disturbance regimes, as well as mass propagule transport, are having dramatic effects on many ecosystems. Both conservationists and ecologists need ecologically relevant metrics to quantify the condition of plant and animal communities. However, current metrics fail to address the invasion of species native to different community types in the same region, even though these ‘native aliens’ can serve as valuable indicators of recent changes in habitat conditions. We propose a novel approach to reconceptualize community biodiversity based on the composition of historically developed habitat-specific species pools. Total observed community diversity can be divided to characteristic diversity, consisting of species belonging to habitat-specific species pool, and derived diversity, consisting of either native or non-native species not typical to a given community and whose presence is driven by adverse human impact. Characteristic and derived diversity in communities have different historical backgrounds; thus, the ecological patterns of these components, effects on ecosystem functioning as well as actions necessary for their conservation are likewise different. We propose the Index of Favourable Conservation Status – the log ratio of characteristic to derived diversity – as an easily quantified, ecologically relevant, and universal indicator of biodiversity integrity and community condition. The Index of Favourable Conservation Status provides valuable information on habitat conservation needs and recent adverse human impact in relative terms and can be compared between regions and across a wide range of ecosystems. It can also be used to monitor restoration success or characterize biodiversity degradation. We present a standardized procedure of determining habitat-specific species pools and bring several examples of how the concept of character and derived diversity can be applied in conservation and research and how expert knowledge on habitat-specific species pool composition can expand our understanding of community biodiversity.