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The tropical forests of Borneo and Amazonia may each contain more tree species diversity in half a square kilometre than do all the temperate forests of Europe, North America, and Asia combined. Biologists have long been fascinated by this disparity, using it to investigate potential drivers of biodiversity. Latitudinal variation in many of these drivers is expected to create geographic differences in ecological and evolutionary processes, and evidence increasingly shows that tropical ecosystems have higher rates of diversification, clade origination, and clade dispersal. However, there is currently no evidence to link gradients in ecological processes within communities at a local scale directly to the geographic gradient in biodiversity. Here, we show geographic variation in the storage effect, an ecological mechanism that reduces the potential for competitive exclusion more strongly in the tropics than it does in temperate and boreal zones, decreasing the ratio of interspecific-to-intraspecific competition by 0.25% for each degree of latitude that an ecosystem is located closer to the Equator. Additionally, we find evidence that latitudinal variation in climate underpins these differences; longer growing seasons in the tropics reduce constraints on the seasonal timing of reproduction, permitting lower recruitment synchrony between species and thereby enhancing niche partitioning through the storage effect. Our results demonstrate that the strength of the storage effect, and therefore its impact on diversity within communities, varies latitudinally in association with climate. This finding highlights the importance of biotic interactions in shaping geographic diversity patterns, and emphasizes the need to understand the mechanisms underpinning ecological processes in greater detail than has previously been appreciated.