Phenotypic differentiation in size and fecundity between native and invasive populations of a species has been suggested as a causal driver of invasion in plants. Local adaptation to novel environmental conditions through a micro-evolutionary response to natural selection may lead to phenotypic differentiation and fitness advantages in the invaded range. Local adaptation may occur along a stress tolerance trade-off, favoring individuals that, in benign conditions, shift resource allocation from stress tolerance to increased vigor and fecundity and, therefore, invasiveness. Alternately, the typically disturbed invaded range may select for a plastic, generalist strategy, making phenotypic plasticity the main driver of invasion success. To distinguish between these hypotheses, we performed a field common garden and tested for genetically based phenotypic differentiation, resource allocation shifts in response to water limitation, and local adaptation to the environmental gradient which describes the source locations for native and invasive populations of diffuse knapweed (Centaurea diffusa). Plants were grown in an experimental field in France (naturalized range) under water addition and limitation conditions. After accounting for phenotypic variation arising from environmental differences among collection locations, we found evidence of genetic variation between the invasive and native populations for most morphological and life-history traits under study. Invasive C. diffusa populations produced larger, later maturing, and therefore potentially fitter individuals than native populations. Evidence for local adaptation along a resource allocation trade-off for water limitation tolerance is equivocal. However, native populations do show evidence of local adaptation to an environmental gradient, a relationship which is typically not observed in the invaded range. Broader analysis of the climatic niche inhabited by the species in both ranges suggests that the physiological tolerances of C. diffusa may have expanded in the invaded range. This observation could be due to selection for plastic, “general-purpose” genotypes with broad environmental tolerances