A dominant plant of temperate nutrient-poor grasslands, Festuca rubra, has been used as a model species to assess biotic effects of fine-scale environmental heterogeneity in the field and its genetic differentiation in response to this variation. Using experimental data, it is shown that this heterogeneity is partly due to interspecific variation in competitive abilities in the ‘matrix’ plants. Festuca rubra possesses remarkable intraspecific differentiation in its parameters of spatial spreading and competitive performance, and in their plasticity under cultured conditions. This morphological plastic response to the environment is weaker in the field. This indicates that in the field individuals use only a fraction of the full potential range of plasticity to respond to variation in competitive environments. A random amplified polymorphic DNA study has shown that populations of F. rubra consist of a high number of coexisting genets. The genet size distribution is strongly skewed, indicating high early stage mortality and lower larger genet mortality. There should be continuous seedling regeneration in order to maintain this genetic structure. The data presented here display major features that distinguish clonal expansion from vertical competition. These are: (i) absence of integration over the whole plant; (ii) potentially unlimited size; (iii) large and unpredictable environmental variation experienced by different parts of the genet; and (iv) absence of a size-determined competition outcome at the genet level, and thus higher potential for species-specific effects.