Abundant plant and vertebrate fossils have been recovered from fluvial sediments deposited in the Bighorn Basin, Wyoming, during the first 13 m.y. of the Tertiary. Here we outline and discuss changes in the composition and diversity of floras and faunas during this period, which includes the recovery of terrestrial ecosystems from the K/T boundary extinctions, and later, during the Paleocene-Eocene transition, the greatest global warming of the Cenozoic. Floral diversity has been studied at three levels of spatial resolution: sub-local (at individual collecting sites), local (along a single bed or stratigraphic horizon), and basin-wide (regional). Sub-local diversity shows a moderate increase from the early to late Paleocene, followed by a decrease across the Paleocene/Eocene boundary, then an increase into the later early Eocene. Local heterogeneity was lower in Paleocene backswamp floras, although distinct groups of species dominated in different local fluvial settings such as backswamps and alluvial ridges. Heterogeneity of backswamp forests increased by about 65% from the early to late Wasatchian (early Eocene). The number of plant species inferred from the Bighorn Basin dataset rose gradually from the Puercan to an early Clarkforkian peak of about 40 species, declined sharply to about 25 species by the Clarkforkian/Wasatchian boundary, then rose through the Wasatchian to about 50 species. A regional analysis of mammalian genera shows high turnover and a rapidly increasing number of genera within a million years of the K/T boundary (10-50 genera), a slight decline to 40 genera by the early Clarkforkian, then an increase from 40 to 75 genera by the late Wasatchian. Our analyses found no major extinctions in mammals during the Paleocene and early Eocene in the Bighorn Basin, but a one-third decrease in the number of plant species at about the Paleocene/Eocene boundary. Rates of taxonomic turnover were much higher for mammals than plants. The diversity trends for plants and mammals show little congruence, implying that the two groups responded in a very different manner to post K/T extinction opportunities. There is also little congruence between plant diversity levels and change in mean annual temperature (MAT) as inferred from foliar physiognomy.