Understanding the mechanisms driving declines in biodiversity with latitude requires assessing if there are ecological limits to the number of species that can coexist, and if these limits vary with latitude, both of which are long‐standing and currently debated questions. Here I show that diversification of North American mammals across the Cenozoic Era slowed as diversity increased. This damping of diversification rates indicates ecological limitation, which occurred even though diversity fluctuated through time and was almost never at an equilibrium ‘saturation’ point. The estimated environmental carrying capacity was correlated with global temperature positively at high latitudes and negatively at low latitudes. Geographical variation in how standing diversity affects diversification rates could help explain the latitudinal biodiversity gradient as well as changes in the strength of the gradient over time.