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Forest community composition is the outcome of multiple forces, including those that increase taxonomic and functional divergence and those that promote convergence in traits. The mechanisms underlying these forces may not operate homogenously within communities; individuals of different species are never perfectly mixed, and thus, species tend to be surrounded and interact with different subsets of species. In fact, taxonomic and functional composition of neighborhoods of different focal species can be highly variable. Here, we examine whether mechanisms driving species‐level neighborhoods relate to intrinsic characteristics of focal species such as differences in life‐history and resource‐uptake strategies and in turn relate to species survival. We focus on two key characteristics: (1) seed mass, which defines a dominant axis of life‐history strategies related to stress tolerance, and (2) understory light preferences that sort species from light‐demanding pioneers to shade‐tolerant. We monitored seedling communities over 10 yr in Puerto Rico and calculated neighborhood trait dispersion in species‐level neighborhoods using seven functional traits. We examined whether species‐level characteristics, seed mass and preferred light conditions, influence patterns of functional dispersion in seedling neighborhoods using linear models. Then, we examined how species‐level functional neighborhoods impact seedling survival. We found that small‐ and large‐seeded species diverge in the type of functional neighborhoods they associate with. Large‐seeded species associate with neighbors that are more similar than expected in leaf economic traits, but more different than expected in seed mass and leaf area traits, while the opposite was found for small‐seeded species. This variation in species functional neighborhood was important in determining seedling survival. In sum, our results suggest that divergent and convergent forces do not operate homogenously over entire communities. Their relative role changes in space, and on a species‐by‐species basis, probably with a deterministic foundation linked to traits such as seed mass.