Mechanisms such as conspecific negative density dependence (CNDD) and niche partitioning have been proposed to explain species coexistence and community diversity. However, as a potentially important axis of niche partitioning, the role of interannual climate variability in driving local community dynamics remains largely unknown. Here we used a 15‐year monitoring data set of more than 53,000 seedlings in a temperate forest to examine (1) what are the relative effects of interannual climate variability, biotic interactions, and habitat conditions on seedling survival; (2) how the effects of biotic interactions change with interannual climate variability, and habitat conditions; and (3) whether the impacts of interannual climate variability, biotic interactions, and habitat conditions differ with plant traits. Interannual climate variability accounted for the most variation in seedling survival at the community level, followed by biotic interactions, and habitat conditions. Increased snowpack and decreased minimum temperature during the non‐growing season had positive effects on seedling survival. Effects of conspecific neighbor density were weakened in higher snowpack, effective accumulated temperature, elevation, and soil‐resource gradient, but were intensified with increased ultraviolet radiation, maximum precipitation, minimum temperature, and soil moisture. In addition, the relative importance of interannual climate variability versus biotic interactions differed depending on species‐trait groups. Specifically, biotic interactions for gravity‐dispersed species had a larger effect size in affecting seedling survival than other trait groups. Also, gravity‐dispersed species experienced a stronger CNDD than wind‐dispersed, probably because wind‐dispersed seedlings rarely had adult conspecifics nearby. We found that interannual climate variability was most strongly associated with seedling survival, but the magnitude of climatic effects varied among species‐trait groups. Interannual climate variability may act as an inhibitor or accelerator to density‐dependent interactions and should be accounted for in future studies, as both a potential direct and indirect factor in understanding the diversity of forest communities.