Negative density-dependent recruitment of seedlings, that is, seeds of a given species are less likely to become established seedlings if the density of that species is high, has been proposed to be an important mechanism contributing to the extraordinary diversity of tropical tree communities because it can potentially prevent any particular species from usurping all available space, either in close proximity to seed sources or at relatively larger spatial scales. However, density-dependent recruitment does not necessarily enhance community diversity. Furthermore, although density-dependent effects have been found at some life stages in some species, no study has shown that density-dependent recruitment affects community diversity. Here we report the results of observations in a lowland, moist forest in the Republic of Panamá in which the species identities of 386,027 seeds that arrived at 200 seed traps were compared with the species identities of 13,068 seedlings that recruited into adjacent plots over a 4-year period. Across the 200 sites, recruit seedling diversity was significantly higher than seed diversity. Part of this difference was explained by interspecies differences in average recruitment success. Even after accounting for these differences, however, negative density-dependent recruitment contributes significantly to the increase in diversity from seeds to seedling recruits.