Shoot herbivory by the sapling specialist shoot-borer Cromarcha stroudagnesia (Lepidoptera, Pyralidae, Chrysauginae) is shown to have large direct and indirect effects on the rates of height increment and mortality of saplings of its host tree, Tabebuia ochracea (Bignoniaceae), in the secondary successional tropical dry forests of the Area de Conservación Guanacaste, Costa Rica. Experiments and field observations over 3-4 years show a substantial reduction in sapling height increments due to C. stroudagnesia herbivory, of equivalent magnitude to the difference in height increments between undamaged saplings in canopy gaps and full understorey shade. Extrapolating this data at average amounts of C. stroudagnesia herbivory increases the duration of the pre-reproductive sapling life stage by about 40% relative to undamaged plants. This is an underestimate, as top shoot herbivory by C. stroudagnesia also increased the probability of canopy gap saplings being overtopped and shaded by surrounding vegetation. Sapling mortality was increased by C. stroudagnesia herbivory, with 11.8% of the most heavily damaged young saplings dying in 3 years while no undamaged saplings died. Cromarcha stroudagnesia herbivory strongly increases with the number of conspecific T. ochracea saplings and the number of conspecific shoots within 50 m of focal saplings. It is therefore likely to disproportionately decrease the number of saplings and rate of recruitment to reproductive age in areas of high conspecific sapling density. These results suggest that sapling herbivory, especially herbivory of terminal meristems, has an important but largely unexplored influence on the population dynamics of tropical tree species. They further demonstrate that sapling herbivory by insects, in addition to the well-studied insect predation and herbivory of seedlings, is likely to influence tree species coexistence in tropical forests.