Despite theoretical advances, the ecological factors and functional traits that enable species varying in seed size and fecundity to coexist remain unclear. Given inherent fecundity advantages, why don't small‐seeded species dominate communities? In perennial grasslands, we evaluated whether small‐seeded species are less tolerant of competition from the community dominant bunchgrass than large‐seeded species, but also less vulnerable to seed predation by mice. We also explored whether trade‐offs involving competitive tolerance include two other functional traits, height and leaf mass per area (LMA). We added seeds of 17 forb species to plots where bunchgrass competition and rodent seed predation were manipulated across sites varying in bunchgrass productivity and thus competitive intensity. Seeds were added at densities mimicking interspecific variation in fecundity among target species. Standardizing for differences in fecundity (i.e. seed input, which enabled us to evaluate inherent interspecific differences in susceptibility to biotic interactions), bunchgrass competition more greatly reduced recruitment and establishment of small‐ versus large‐seeded species, whereas rodent seed predation more greatly reduced the recruitment of large‐ versus small‐seeded species. Plant height and LMA were unrelated to the competition effect size. Small‐seeded species abundance decreased across sites increasing in bunchgrass productivity, whereas this was not the case for large‐seeded species. For adult plants but not seedlings, community‐weighted functional trait means (CWM) for seed size, height and LMA increased in plots with versus without bunchgrass competition and the CWM for seed size and height also increased at sites with greater bunchgrass productivity (for adults only). In contrast, rodent seed predation had no significant effects on CWM seed size. At the end of the experiment, adult abundance positively correlated with plant fecundity in plots lacking bunchgrass, indicating the inherent advantages accrued to high fecundity small‐seeded species. However, with bunchgrass competition, abundances were equalized across species due to reduced competitive tolerance of high fecundity small‐seeded species. Synthesis. Our results suggest that coexistence among subordinate forb species varying in seed size and fecundity is in‐part due to a trade‐off involving competitive tolerance and fecundity, mediated by seed size and associated functional traits. Our results suggest that coexistence among subordinate forb species varying in seed size and fecundity is in part due to a trade‐off involving competitive tolerance and fecundity, mediated by seed size and associated functional traits.