One of the most promising applications of plant functional traits is to explain the coexistence of competing species. Yet ecologists have so far struggled to link traits and coexistence, limiting our ability to predict how plant communities will respond to global change. Here, I show how mechanistic models of plant community dynamics grounded in ecophysiology provide a path forward for understanding coexistence from functional traits and forecasting shifts in biodiversity and ecosystem function under global change. First, I present a theoretical model of competition for water and light among diverse assemblages of plants. I then use insights from this model to identify diversity-maintaining functional tradeoffs among co-occurring species in a national forest inventory dataset. Finally, I demonstrate that the model’s predictions for shifts in plant biodiversity under intensifying precipitation regimes are consistent with global biogeographic patterns in plant hydraulic traits