Herbaceous plants are a key component of tropical forests. Previous work indicates that herbs contribute substantially to the species richness of tropical plant communities. However, the processes structuring tropical herb diversity, and how they contrast with woody communities, have been underexplored. Within the understory of a 50-ha forest dynamics plot in central Panama, we compared the diversity, distribution, and abundance of vascular herbaceous plants with woody seedlings (i.e., tree and lianas <1cm DBH and ≥20cm tall). Beta-diversity was calculated for each community using a null model approach. We then assessed the similarity in alpha and beta-diversity among herbs, tree seedlings, and liana seedlings. Strengths of habitat associations were measured using permutational ANOVA among topographic habitat-types. Variance partitioning was then used to quantify the amount of variation in species richness and composition explained by spatial and environmental variables (i.e., topography, soils, and shade) for each growth form. Species richness and diversity were highest for tree seedlings, followed by liana seedlings and then herbs. In contrast, beta-diversity was 16-127% higher for herbs compared to woody seedlings, indicating higher spatial variation in this stratum. We observed no correlation between local richness or compositional uniqueness of herbs and woody seedlings across sites, indicating that different processes control the spatial patterns of woody and herbaceous diversity and composition. Habitat associations were strongest for herbs, as indicated by greater compositional dissimilarity among habitat types. Likewise, environmental variables explained a larger proportion of the variation in species richness and composition for herbs than for woody seedlings (richness = 25%, 14%, 12%; composition = 25%, 9%, 6%, for herbs, trees, and lianas, respectively). These differences between strata did not appear to be due to differences in lifespan alone, based on data from adult trees. Our results point to contrasting assembly mechanisms for herbaceous and woody communities, with herbs showing stronger niche-derived structure. Future research on tropical herbaceous communities is likely to yield new insights into the many processes structuring diverse plant communities.