Background and Aims A trade-off between shade tolerance and growth in high light is thought to underlie the temporal dynamics of humid forests. On the other hand, it has been suggested that tree species sorting on temperature gradients involves a trade-off between growth rate and cold resistance. Little is known about how these two major trade-offs interact. Methods Seedlings of Australian tropical and cool-temperate rainforest trees were grown in glasshouse environments to compare growth versus shade-tolerance trade-offs in these two assemblages. Biomass distribution, photosynthetic capacity and vessel diameters were measured in order to examine the functional correlates of species differences in light requirements and growth rate. Species light requirements were assessed by field estimation of the light compensation point for stem growth. Results Light-demanding and shade-tolerant tropical species differed markedly in relative growth rates (RGR), but this trend was less evident among temperate species. This pattern was paralleled by biomass distribution data: specific leaf area (SLA) and leaf area ratio (LAR) of tropical species were significantly positively correlated with compensation points, but not those of cool-temperate species. The relatively slow growth and small SLA and LAR of Tasmanian light-demanders were associated with narrow vessels and low potential sapwood conductivity. Conclusions The conservative xylem traits, small LAR and modest RGR of Tasmanian light-demanders are consistent with selection for resistance to freeze–thaw embolism, at the expense of growth rate. Whereas competition for light favours rapid growth in light-demanding trees native to environments with warm, frost-free growing seasons, frost resistance may be an equally important determinant of the fitness of light-demanders in cool-temperate rainforest, as seedlings establishing in large openings are exposed to sub-zero temperatures that can occur throughout most of the year.