A fundamental assumption of coexistence theory is that competition inevitably decreases species diversity. Consequently, in the quest to understand the ecological regulators of diversity, there has been a great deal of focus on processes with the potential to reduce competitive exclusion. However, the notion that competition must decrease diversity is largely based on the outcome of two-species interaction experiments and models, despite the fact that species rarely interact only in pairs in natural systems. In a field experiment, we found that competition among native perennial plants in multispecies assemblages was far weaker than competition between those same species in pairwise arrangements and that indirect interactions appeared to weaken direct competitive effects. These results suggest that community assembly theory based on pairwise approaches may overestimate the strength of competition and likelihood of competitive exclusion in species-rich communities. We also found that Centaurea stoebe, a North American invader, retained strong competitive effects when competing against North American natives in both pairwise and multispecies assemblages. Our experimental results support an emerging body of theory suggesting that complex networks of competing species may generate strong indirect interactions that can maintain diversity and that ecological differentiation may not be necessary to attenuate competition.