Abstract Ecological communities encompass rich diversity across multiple trophic levels. While modern coexistence theory has been widely applied to understand community assembly, its traditional formalism only allows assembly within a single trophic level. Here, using an expanded definition of niche and fitness differences applicable to multitrophic communities, we study how diversity within and across trophic levels affects species coexistence. If each trophic level is analysed separately, both lower‐ and higher trophic levels are governed by the same coexistence mechanisms. In contrast, if the multitrophic community is analysed as a whole, different trophic levels are governed by different coexistence mechanisms: coexistence at lower trophic levels is predominantly limited by fitness differences, whereas coexistence at higher trophic levels is predominantly limited by niche differences. This dichotomy in coexistence mechanisms is supported by theoretical derivations, simulations of phenomenological and trait‐based models, and a case study of a primeval forest ecosystem. Our work provides a general and testable prediction of coexistence mechanism operating in multitrophic communities.