Although it has long been recognized that marsh plant community composition shifts across estuarine salinity gradients, the mechanisms responsible for this species zonation have never been experimentally examined. In southern New England marshes of the United States, we investigated the relative importance of physical and biotic factors in generating estuarine species distribution patterns. Greenhouse studies revealed that all of the common plants in this system grow better in fresh water than in full-strength salt water. To test the hypothesis that the spatial segregation of these plants is driven by differential tolerance to salt stress and plant competition, we performed transplant experiments with 10 common plants in the system. When freshwater marsh plants were transplanted to salt marshes, they did poorly and generally died with or without neighbors present. In contrast, when saltmarsh plants were transplanted to freshwater marshes, they thrived in the absence of neighbors, growing better than they did in salt marshes, but when neighbors were present, they were strongly suppressed. These results suggest that the spatial segregation of plants across estuarine salinity gradients is driven by competitively superior freshwater marsh plants displacing salt-tolerant plants to physically harsh saltmarsh habitats, whereas freshwater marsh plants are limited from living in salt marshes by physical factors (e.g., high salinities). These results contribute to our understanding of the organization and assembly of tidal marsh plant communities and have important implications for understanding how marsh plant communities will respond to human modification of estuarine hydrology and climate change.