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Much recent theory has focused on the role of neutral processes in assembling communities, but the basic assumption that all species are demographically identical has found little empirical support. Here, we show that the framework of the current neutral theory can easily be generalized to incorporate species differences so long as fitness equivalence among individuals is maintained through trade-offs between birth and death.Our theory development is based on a careful reformulation of the Moran model of metacommunity dynamics in terms of a non-linear one-step stochastic process, which is described by a master equation.We demonstrate how fitness equalization through demographic trade-offs can generate significant macroecological diversity patterns, leading to a very different interpretation of the relation between Fisher's α and Hubbell's fundamental biodiversity number. Our model shows that equal fitness (not equal demographics) significantly promotes species diversity through strong selective sieving of community membership against high-mortality species, resulting in a positive association between species abundance and per capita death rate. An important implication of demographic trade-off is that it can partly explain the excessively high speciation rates predicted by the neutral theory of the stronger symmetry. Fitness equalization through demographic trade-offs generalizes neutral theory by considering heterospecific demographic difference, thus representing a significant step toward integrating the neutral and niche paradigms of biodiversity.