Summary1. Evidence from plant-community structure suggests that niche segregation between plant species is widespread, but the mechanisms are still generally obscure. We used experimental mesocosms to investigate the role of above-and below-ground competition in defining the distinct niche distributions of two Senecio species that separate along a water-table gradient in meadow habitats. In a target-border design, Senecio target plants were surrounded by six fence-sitting plants of Phleum pratense and fully factorial, randomised treatments for above-ground and below-ground competition, water level and nitrogen were applied. 2. Below-ground competition was found to be the most influential factor for plant biomass and seed production, whereas above-ground competition had negligible effects. Judging from their performances under different combinations of water level and nitrogen fertilization, the Senecio species showed different types of niche differentiation. Senecio aquaticus showed a preference for waterlogged over dry soils irrespective of the presence or absence of competition. Senecio jacobaea showed no preference for any hydrological condition, as long as below-ground interaction was prevented. In the presence of competing roots, it showed the expected preference for dry soils, especially under N-fertilized conditions. 3. Below-ground competition was especially intense under conditions of high supply of edaphic resources and even had the potential to entirely abolish any positive effects of increased water-or nitrogen-supply. This supports the highly debated view that the importance of below-ground competition increases rather than decreases with below-ground resource supply. A functional mechanism for the dry-habitat niche of S. jacobaea is suggested by the severe effect of competition on this species in waterlogged soil, especially when nitrogen was added. Since such conditions favoured growth of competing neighbours, the intensified depletion of other soil resources may have been the cause of the poor performance by S. jacobaea. 4. Synthesis. Niche differentiation can either be a genetically fixed preference or a result of current competition. Below-ground competition was found to be a much stronger driver of niche differentiation than generally assumed. Even in highly productive systems it can be the principal type of interaction, which is contrary to common assumptions and which might be the case when some but not all edaphic resources are in ample supply.