Species diversity and coexistence have long been central foci of ecology, but field studies are often limited to describing diversity patterns, while theory frequently ignores environmental variation. Scale transition theory is an ideal framework in which to study species diversity, as it explicitly accounts for this environmental variability and allows for the quantification of coexistence mechanisms. Each coexistence mechanism arises from specific types of biotic and abiotic interactions. Moreover, mechanism magnitudes provide information about how these interactions contribute to coexistence. By studying how the natural history of a community determines these biotic and abiotic interactions, insight can be gained into how that natural history influences coexistence. Environmental variation is a central hypothesis for the maintenance of diversity in both desert annual plants and streams. This dissertation is broadly interested in the way differences in the environmental responses of species interact with the structure of the environmental conditions to affect coexistence. I use scale transition theory to develop theoretical understanding of how life history and environmental structure in these communities influence coexistence mechanisms and diversity. In desert annual plants, the focus is on the environmental response itself: how germination depends on environmental conditions. I analyze how this life history interacts with variation in the environment to affect coexistence. The germination responses of desert annual plants to an unstudied type of environmental variation, duration of soil moisture after rainfall, generate species-specific but highly structured patterns of germination variation. Although this germination variation is one-dimensional, the nonlinearities that arise due to germination biology generate sufficient germination variation to promote coexistence by the temporal storage effect. In stream communities, I examine how the physical structure of stream environments affects coexistence given that species’ performance is environmentally dependent. This dissertation demonstrates that patterns of diversity along the stream are related to the strength of coexistence. The downstream drift of organisms has relatively minor effects on coexistence despite asymmetric shifts in the distribution of organism in the stream. This study identifies conditions that eliminate the effects of the branched structure of stream networks on coexistence. Branching has no effect on community dynamics if (a) tributaries have identical environmental conditions, (b) habitat size increases additively at confluences, and (c) demographic stochasticity is unimportant. Any effects of branching on coexistence caused by violating the environmental condition are asymptotically eliminated as streams increase in size. These studies provide a theoretical, mechanistic foundation for the study of stream communities that addresses environmental and life history factors long recognized as important by empirical stream ecologists.