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Although the species pool, dispersal, and local interactions all influence species diversity, their relative importance is debated. I examined their importance in controlling the number of native and exotic plant species occupying tussocks formed by the sedge Carex nudata along a California stream. Of particular interest were the factors underlying a downstream increase in plant diversity and biological invasions. I conducted seed addition experiments and manipulated local diversity and cover to evaluate the degree to which tussocks saturate with species, and to examine the roles of local competitive processes, abiotic factors, and seed supply in controlling the system-wide patterns. Seeds of three native and three exotic plants sown onto experimentally assembled tussock communities less successfully established on tussocks with a greater richness of resident plants. Nonetheless, even the most diverse tussocks were somewhat colonized, suggesting that tussocks are not completely saturated with species. Similarly, in an experiment where I sowed seeds onto natural tussocks along the river, colonization increased two- to three-fold when I removed the resident species. Even on intact tussocks, however, seed addition increased diversity, indicating that the tussock assemblages are seed limited. Colonization success on cleared and uncleared tussocks increased downstream from km 0 to km 3 of the study site, but showed no trends from km 3 to km 8. This suggests that while abiotic and biotic features of the tussocks may control the increase in diversity and invasions from km 0 to km 3, similar increases from km 3 to km 8 are more likely explained by potential downstream increases in seed supply. The effective water dispersal of seed mimics and prevailingly downstream winds indicated that dispersal most likely occurs in a downstream direction. These results suggest that resident species diversity, competitive interactions, and seed supply similarly influence the colonization of native and exotic species.