Most large-scale multispecies studies of tree growth have been conducted in tropical and cool temperate forests, whereas Mediterranean water-limited ecosystems have received much less attention. This limits our understanding of how growth of coexisting tree species varies along environmental gradients in these forests, and the implications for species interactions and community assembly under current and future climatic conditions. Here, we quantify the absolute effect and relative importance of climate, tree size and competition as determinants of tree growth patterns in Iberian forests, and explore interspecific differences in the two components of competitive ability (competitive response and effect) along climatic and size gradients. Spatially explicit neighborhood models were developed to predict tree growth for the 15 most abundant Iberian tree species using permanent-plot data from the Spanish Second and Third National Forest Inventory (IFN). Our neighborhood analyses showed a climatic and size effect on tree growth, but also revealed that competition from neighbors has a comparatively much larger impact on growth in Iberian forests. Moreover, the sensitivity to competition (i.e. competitive response) of target trees varied markedly along climatic gradients causing significant rank reversals in species performance, particularly under xeric conditions. We also found compelling evidence for strong species-specific competitive effects in these forests. Altogether, these results constitute critical new information which not only furthers our understanding of important theoretical questions about the assembly of Mediterranean forests, but will also be of help in developing new guidelines for adapting forests in this climatic boundary to global change. If we consider the climatic gradients of this study as a surrogate for future climatic conditions, then we should expect absolute growth rates to decrease and sensitivity to competition to increase in most forests of the Iberian Peninsula (in all but the northern Atlantic forests), making these management considerations even more important in the future.