In order to improve the understanding on the coexistence of rhododendron species and canopy trees in old growth forests with less anthropogenic influence, we studied the role of spatial segregation versus density-dependent mortality of regeneration of Abies densa and Rhododendron hodgsonii in Central Bhutan. The spatial patterns and the microsite preferences of A. densa and R. hodgsonii were studied on 12 permanent sample plots in 1996 and 2001 in Central Bhutan. We characterized survival of the two species on different microsites and tested for deviations of random mortality. Intraspecific spatial correlations were highly positive for individuals of both species in adjacent size classes. Higher positive intraspecific as compared to interspecific correlations suggested spatial segregation of patches of different species and of plants in different size classes. For A. densa seedlings, we detected density-independent mortality as a response to environmental heterogeneity. Spatial distribution of A. densa trees was random or overdispersed showing that in later life stages competition gets stronger. Seedlings of R. hodgsonii showed higher densities than seedlings of A. densa. Density-dependent mortality started at earlier life stages, when density in clumps was high. We found seedlings of both species on all microsites; temporal changes of percentages of seedlings on different microsites showed a similar trend with increases of seedlings on bryophyte mats and decreases on all other microsites. Decreases on litter and nurse logs, however, were much stronger for A. densa than for R. hodgsonii. R. hodgsonii was more frequent on nurse logs and showed better survival on this microsite. Survival of A. densa on nurse logs was low; nurse logs do not play an important role as safe site for A. densa in stands with an understory of R. hodgsonii. Percentages of R. hodgsonii established on litter showed only small decreases and were still higher than its spatial coverage. A. densa had seedlings in a seedling and sapling bank. Survival in a storage stage allows A. densa to outweigh the limitations of narrower regeneration niches and may, in combination with spatial segregation in early life stages, contribute to the coexistence of the two species.