Premise of the study: Tropical forests are the most species-rich terrestrial communities on Earth, and understory trees and shrubs comprise a large fraction of their plant species diversity, especially at high rainfalls. The mechanisms responsible for generating such high levels of diversity remain unknown. One hypothesis is that fleshy-fruited understory species should have limited seed dispersal due to the sedentary nature of their avian dispersers, resulting in restricted gene flow, population differentiation at small spatial scales, and ultimately, high rates of allopatric speciation. Methods: We sampled four species of the hyperdiverse tropical shrub genus Psychotria (Rubiaceae) on Barro Colorado Island (BCI) and two nearby sites in Panama. We genotyped each species with AFLPs, assessed genetic differentiation among populations, and determined patterns of fine-scale spatial genetic structure in the BCI population. Measures of spatial autocorrelation and population density were used to estimate the dispersal distance parameter σ. Key results: Regionally, ΦPT values ranged from 0.13 to 0.28, reflecting local population differentiation and suggesting that Lake Gatun/Rio Chagres has posed a relatively strong barrier to gene flow. Fine-scale spatial genetic structure on BCI was stronger than in most canopy trees, and estimated distances of gene flow were unusually low for endozoochorous tropical woody plants, with dispersal distance σ = 9–113 m. Conclusions: These results demonstrate comparatively limited gene flow in bird-dispersed understory species, supporting a hypothesized mechanism for generating high levels of plant species diversity in tropical rain forests, in one of the largest genera of flowering plants on Earth.