1. Ridges of tropical mountains often differ strikingly from neighbouring ravines in terms of forest structure, productivity, and species composition. This heterogeneity is poorly understood despite its critical role in biodiversity maintenance, carbon and nutrient budgets. 2. We examined measures of tree biomass and productivity, foliage and litter quality (nutrient concentrations, specific leaf mass, phenolics), herbivory and leaf litter decomposition in each six plots laid out in upper and lower slope position in a tropical montane moist forest in southeastern Ecuador. 3. Productivity, quality of foliage and litter and herbivory were significantly lower in upper slope position and closely correlated with soil nutrient concentrations and accumulated humus. The decomposition of upper slope leaf litter (decomposition rate k) was substantially lower than in litter from lower slope forest, whereas the site of decomposition (slope position) only had a marginal effect on the decomposition rate. 4. Our results suggest that the differences in stand structure, productivity, foliar quality, herbivory and decomposition between slope positions are ultimately due to stronger nutrient limitations in upper slope forest. We propose a general conceptual model that explains origin and maintenance of contrasting forest types along topographical gradients through down-slope fluxes of nutrients and water, and a nutrient-driven positive feedback cycle.