1. There is remarkable variation in life histories of coexisting plant species. These 'alternative designs' for the given set of environmental conditions are likely to play a role in species niche differences and thus may underlie species coexistence, although there is no clear demonstration of it. Currently available data on within-community differentiation concern primarily easy and measurable traits that are not fully informative of life history variation. Their relevance for functional differentiation of species and species coexistence is far from clear. 2. Here we examined differentiation of coexisting species in demographic parameters and how it determines species' response to neighbors. We determined these parameters for a set of 21 co-occurring species by fitting a process-based model to a long-term (30 yrs) data series of shoot counts. We examined the functional relevance of these parameters using a field experiment. We further asked with which functional traits they are correlated. 3. Species were differentiated along two largely independent axes: (i) slow vs. fast, separating species according to instantaneous growth rate, competitive response and intraspecific density dependence; and (ii) dispersal vs. local dynamics, which separated species with strong dispersal (by seeds or vegetative) from species that tended to stay in the occupied spot. While the slow-fast axis was associated with commonly used leaf and seed traits, the dispersal axis was best predicted by lateral spreading distance. 4. Each of these two axes predicted different components of species' responses to neighbor competition: the slow-fast axis was a good predictor of the short-term response, whereas dispersal axis was a good predictor of the long-term response. 5. Synthesis. Demographic differentiation of coexisting species resembles to an important degree demographic differentiation known from large-scale comparisons. This differentiation is functionally meaningful also at the fine scale; its role in species’ responses to competition implies it is involved in species niche differentiation and coexistence. While seed and leaf traits are important correlates of demographic differentiation, a hitherto underappreciated trait, viz. lateral spreading distance, is an important predictor of the dispersal axis at the fine-scale and should be more widely used.