We investigated how stress (low moisture and mineral nutrients) influences how functional community assembly differs from random drift assembly. Plant strategy theory suggests that stressful habitats should be dominated by short species with adaptations for conserving resources. The “stress-dominance hypothesis” suggests that stressful habitats should have low functional diversity, and both have been confirmed in European grasslands. We sampled plants at 19 locations along well-known moisture gradients from dry prairies to wet sedge meadows. At each location, three nested sample plots were established using three grain sizes (0.1 m^2, 1.0 m^2, 10 m^2). Four functional traits (two size traits and two leaf economics traits) were measured in every instance of each plant species. We used Monte Carlo simulations to estimate the standardized effect size of abundance-weighted mean and functional diversity using the observed species. Results for weighted mean traits were consistent with strategy theory in terms of size traits only. Results for functional diversity were consistent with the stress-dominance hypothesis in terms of leaf economics traits, while the results for plant height were opposite of theory. We know of no other study that has observed these alternative patterns across the two main axes of plant functional traits.