Functional trait diversity is used as a way to infer mechanistic processes that drive community assembly. While functional diversity within communities is often viewed as a response variable, here we present and test a framework for how functional diversity among taxa in the regional species pool drive the assembly of communities among habitats. We predicted that species pool functional diversity should work with environmental heterogeneity to drive β-diversity. We tested these predictions by modeling empirical patterns in invertebrate communities from 570 streams in 52 watersheds. Our analysis of the field data provided strong support for the inclusion of both functional diversity and environmental heterogeneity in the models, and our predictions were supported when the community was analyzed all together. However, analyses within individual functional feeding guilds revealed strong context dependency in the relative importance of functional diversity, γ-richness, and environmental heterogeneity on β-diversity. We interpret the results to mean that functional diversity can play an important role in driving β-diversity; however, within guilds the nature of interspecific interactions and species pool size complicate the relationship. Future research should test this conceptual model across different ecosystems and in experimental settings using metacommunity mecocosms to enhance our understanding the role that functional variation plays in generating spatial biodiversity patterns.