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KEY-WORDS: Bolivia, drought tolerance, shade tolerance, functional traits, trade-offs, ecophysiology, species distribution Tropical forests occur under rainfall regimes that vary greatly in the rainfall pattern and frequency and intensity of drought. Consequently water availability is one of the most important environmental factors influencing community structure, species composition, and plant functioning across large-scale rainfall gradients and small-scale topographic gradients within forests. The relative success of tree species to establish along these gradients of water availability and their success in dealing with future changes in water availability will depend on how they are adapted to tolerate drought. In this dissertation I applied a multi-species, multi-trait approach in field studies and a controlled experiment to give detailed information on the mechanisms of drought-tolerance of a large set of tropical dry and moist forest tree species. The following research questions were addressed; 1) How do dry and moist forests differ in soil water availability? 2) How are dry and moist forest species adapted to drought and what different drought-strategies can be distinguished? 3) Is there a trade-off between drought- and shade-tolerance? and 4) How do drought- and shade-tolerance determine local and regional tree species distribution? Dry season soil water availability is clearly lower in the dry forest than in the moist forest. Especially in the dry forest there is a lot of temporal and spatial variation in soil water availability. Temporal variation depends on the annual cycle of precipitation. Spatial heterogeneity is two-dimensional; 1) water availability varies with topography of the landscape; elevated crests are dry in comparison to slopes and low valleys, and 2) soil water is vertically redistributed with soil depth; in the dry season more water is available in deep soil layers while in the wet season most water is found in the top soil. When combining temporal and spatial dimensions, a complex mosaic of soil water availability emerges that shows great potential for niche partitioning among species at various levels, if species are adapted to exploit this variation. Seedlings of dry forest species have evolved mechanisms that enhance their access to water in deep soil layers, increase drought-induced cavitation resistance and increase water conservation. Seedlings of moist forest species show adaptations that improve their light foraging capacity and increase nutrient and water acquisition. Associations among functional traits show that there are three major drought strategies among tropical tree species, 1) physiological drought-tolerance, 2) drought-intolerance and 3) drought-avoidance. No conclusive evidence for a direct trade-off between species drought- and shade-tolerance was found, and the association between drought- and shade-tolerance is mainly subject to the scale of observation. On small scales, within the dry forest, drought- and shade-tolerance are positively related, as species hydraulic properties are integrally linked with niche differentiation for both light and water. This implies that in their distribution, light-demanding species will be restricted to habitats that combine high light and high moisture availability, while shade-tolerant species will be the better competitors in drier and shadier habitats. On larger scales a strong trade-off between above and belowground biomass allocation was found, which should in theory have resulted in a trade-off between drought- and shade-tolerance, but in practice it did not. Plants can compensate for a low root mass fraction by producing relatively cheap roots with a large specific root length and compensate for a low leaf mass fraction by making cheap leaves with a large specific leaf area. Drought- and shade-tolerance thus depend largely on different suites of morphological traits and can be uncoupled. Species distribution along the rainfall gradient was not directly explained by species drought survival, mainly because deciduousness was the most important factor contributing to survival and deciduous species are well represented in both dry and moist forests. The occurrence of evergreen species at the dry end of the rainfall gradient largely depends on drought related traits as a high wood density and a large biomass allocation to deep roots. Species occurrence at the moist end of the rainfall gradient was mainly determined by traits related to light-demand, as a high leaf mass fraction and long, branched root systems. In conclusion, I propose that at small scales, within forests, species distribution along water gradients depends on the interaction between species drought- and shade-tolerance while at larger scales distribution of (evergreen) species is mainly determined by their drought-tolerance.