Understanding how communities respond to environmental variation is a central goal in ecology. Plant communities respond to environmental gradients via intraspecific and/or interspecific variation in plant functional traits. However, the relative contribution of these two responses to environmental factors remains poorly tested. We measured six functional traits (height, leaf thickness, specific leaf area (SLA), leaf carbon concentration (LCC), leaf nitrogen concentration (LNC) and leaf phosphorus concentration (LPC)) for 55 tree species occurring at five elevations across a 1200 m elevational gradient of subalpine forests in Yulong Mountain, Southwest China. We examined the relative contribution of interspecific and intraspecific traits variability based on community weighted mean trait values and functional diversity, and tested how different components of trait variation respond to different environmental axes (climate and soil variables). Species turnover explained the largest amount of variation in leaf morphological traits (leaf thickness and SLA) across the elevational gradient. However, intraspecific variability explained a large amount of variation (49.3%-76.3%) in three other traits (height, LNC and LPC) despite high levels of species turnover. The detection of limiting similarity in community assembly was improved when accounting for both intraspecific and interspecific variability. Different components of trait variation respond to different environmental axes, especially soil water content and climatic variables. Our results indicate that intraspecific variation is critical for understanding community assembly and evaluating community response to environmental change.