Abstract Asymmetrical light competition and direct detrimental effect of nitrogen have been proposed as two main mechanisms driving species richness declines following nitrogen (N) addition. N addition is also known to alter functional trait composition towards increased dominance of tall and fast‐growing species. However, whether trait changes vary between species and, in particular, how the traits of tall and short species respond to N addition has rarely been studied. Understanding whether different trait changes occur for tall and short species would provide insight into mechanisms underlying N addition effects. Based on a long‐term N addition experiment, we measured the natural height of 44 plant species and the photosynthetic active radiation (PAR) at seven heights in the vegetation and identified a clear stratification of the plant community into tall species (>30 cm tall), which experienced high light conditions, and short species that grew under the canopy. We also measured four functional traits, including maximum plant height, specific leaf area, leaf dry matter content and leaf thickness, on 35 species that occurred in fertilized and unfertilized plots. Structural equation modelling revealed that nitrogen (N) addition significantly reduced species richness by enhancing light asymmetry and had no direct effects, suggesting that N detrimental effects are negligible in our system. Consistent with this, we found different responses of traits and diversity for the tall and short species. Specifically, N addition reduced the number of short species but increased the number of tall species. In addition, specific leaf area increased, and leaf dry matter content decreased, for short species only, suggesting that they shifted to a fast growth strategy to cope with lower light levels. In contrast, tall species increased their height further to capture more light at the top of the canopy. Synthesis. The divergent trait responses observed for tall and short species show that although certain traits, like height and leaf traits, show correlated responses at the whole community level, these correlations may not be consistent across all species. Together, our results highlight that light competition is the main mechanism driving species loss following N addition.