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The mechanisms that drive species coexistence and community dynamics have long puzzled ecologists. Here, we explain species coexistence, size structure and diversity patterns in a phytoplankton community using a combination of four fundamental factors: organism traits, size-based constraints, hydrology and species competition. Using a 'microscopic' Lotka-Volterra competition (MLVC) model (i.e. with explicit recipes to compute its parameters), we provide a mechanistic explanation of species coexistence along a niche axis (i.e. organismic volume). We based our model on empirically measured quantities, minimal ecological assumptions and stochastic processes. In nature, we found aggregated patterns of species biovolume (i.e. clumps) along the volume axis and a peak in species richness. Both patterns were reproduced by the MLVC model. Observed clumps corresponded to niche zones (volumes) where species fitness was highest, or where fitness was equal among competing species. The latter implies the action of equalizing processes, which would suggest emergent neutrality as a plausible mechanism to explain community patterns. [ABSTRACT FROM AUTHOR]