Niche differentiation, assumed to be a key mechanism of species coexistence, requires that species differ in their functional traits. So far it remains unclear to which extent trait plasticity leads to niche shifts of species at higher plant diversity, thereby increasing or decreasing niche overlap between species. To analyse this question it is convenient to measure niches indirectly via the variation in resource-uptake traits rather than directly via the resources used. We provisionally call these indirectly measured niches trait-based niches. We studied shoot- and leaf-morphological characteristics in seven legume species in monoculture and multi-species mixture in experimental grassland. Legume species varied in the extent of trait variation in response to plant diversity. Trait plasticity led to significant shifts in species niches in multiple dimensions. Single-species niches in several traits associated with height growth and filling of canopy space were expanded, while other niche dimensions were compressed or did not change with plant diversity. Niche separation among legumes decreased in dimensions related to height growth and space filling, but increased in dimensions related to leaf size and morphology. The total extent of occupied niche space was larger in mixture than in the combined monocultures for dimensions related to leaf morphology and smaller for dimensions related to whole-plant architecture. Taller growth, greater space filling and greater plasticity in shoot height were positively, while larger values and greater plasticity in specific leaf area were negatively related with increased performance of species in mixture. Our study shows that trait variation in response to plant diversity shifts species niches along trait axes. Plastically increased niche differentiation is restricted to niche dimensions that are apparently not related to size-dependent differences between species, but functional equivalence (convergence in height growth) rather than complementarity (divergence in traits associated with light acquisition) explains increased performance of legumes in mixture.