Climate-induced widespread dieback of dominant tree species may lead to rapid large-scale vegetation shifts. We analyzed mechanisms of potential forest composition shift related to a mass mortality event triggered by an ENSO-related warm drought occurred in 1998-99 in mixed Nothofagus-Austrocedrus forests of northern Patagonia. Extensive sampling of these transitional forests showed that mortality of adult trees during the 1998-99 drought was an order of magnitude higher in the angiosperm Nothofagus dombeyi (11-57% of trees killed) than in the conifer Austrocedrus chilensis (0-5% of trees killed). Composition of the forest changed from being N. dombeyi-dominated (65%) to a nearly equally represented mixed N. dombeyi-A. chilensis forest. Likewise, 7-30% of N. dombeyi saplings were killed compared to 1-1.2% of A. chilensis saplings.  N. dombeyi reduced its density of live trees from 243 to 105 trees ha^-1 resulting in numerous drought-gaps. Drought gaps had lower diffuse radiation levels and 100% lower summer soil moisture contents compared to nearby tree fall gaps. Two-year monitoring natural seedling establishment within drought gaps indicates that A. chilensis seedlings survived 4 times more than N. dombeyi seedlings. Likewise, 2-year survival of transplanted seedlings was 3 times higher in conifer vs. angiosperm seedlings. Five years after the event, A. chilensis seedlings established in drought gaps were 5 times more abundant than N. dombeyi seedlings, contrasting with similar densities under undisturbed canopies. Our results document important angiosperm-to-conifer shifts mediated by drought and  suggest that dieback-induced compositional shifts of forests may not only be driven by differential adult and sapling mortality but also by post-drought biotic and abiotic changes affecting tree seedling recruitment performance.