The agricultural conversion of natural habitats is one of the main drivers of biodiversity loss worldwide. In the ∼2 million km2 Brazilian cerrado biome, a global biodiversity hotspot, vast areas have been converted into croplands and cattle pastures. Because the cerrado biome is overwhelmingly contained within private lands, Brazil's environmental legislation should serve as a decisive instrument in protecting these natural ecosystems. We assessed the role of Legal Reserves (LRs), legally defined as the minimum proportion of private landholdings set aside to protect natural vegetation, in the conservation of the cerrado biome. We assume that the property-scale allocation of LRs is primarily based on economic decision-making, creating a bias against cerrado protection. We therefore assessed the area ratio between forest vegetation (FV) and grassland vegetation (GV) areas across LRs within 48,762 landholdings, 9 formal protected areas (PAs) and 34 Indigenous Lands (ILs) within the cerrado (sensu lato) of the 903,357-km2 state of Mato Grosso, Brazil. We show that there are 7.26 ha of forest lands for each hectare of native grasslands within private RLs of the cerrado biome within Mato Grosso, a ratio almost three-fold larger than that found in formal PAs and ILs. ILs protect in absolute values (hectares) six-fold more native grassland vegetation than PAs. We discuss the policy relevance of this severe land-use bias in maintaining the heterogeneity of cerrado habitats for biodiversity conservation within private properties, which account for 90% of the entire cerrado biome.