Phenotypic variability within tree species responds to local tree species richness. However, we lack evidence on how different sources of trait variation shape tree-tree interactions. Along a diversity gradient from one to eight tree species, we sampled 4,568 leaves from 381 trees to study changes in intraspecific and intraindividual leaf trait variability and assessed their contribution to community functional diversity. Intraspecific variability decreased with tree species richness, while intraindividual variability barely responded. Functional overlap between conspecific trees increased with tree species richness and through intraindividual variation, but was reduced through intraspecific variability, meaning that intraspecific variability may reduce intraspecific competitive interactions while intraindividual variability could arise due to varying microenvironmental conditions within the canopy. Last, intraspecific and intraindividual variability explained high community functional richness and divergence, respectively, especially in mixtures. Our findings emphasize that fine-scale variability influences tree-tree interactions and can be a driver of local functional diversity.