Dominance of free-floating plants poses a threat to biodiversity in many freshwater ecosystems. Here we propose a theoretical framework to understand this dominance, by modeling the competition for light and nutrients in a layered community of floating and submerged plants. The model shows that at high supply of light and nutrients, floating plants always dominate due to their primacy for light, even when submerged plants have lower minimal resource requirements. The model also shows that floating-plant dominance cannot be an alternative stable state in light-limited environments but only in nutrient-limited environments, depending on the plants’ resource consumption traits. Compared to unlayered communities, the asymmetry in competition for light—coincident with symmetry in competition for nutrients—leads to fundamentally different results: competition outcomes can no longer be predicted from species traits such as minimal resource requirements (R* rule) and resource consumption. Also, the same two species can, depending on the environment, coexist or be alternative stable states. When applied to two common plant species in temperate regions, both the model and field data suggest that floating-plant dominance is unlikely to be an alternative stable state.