Cedrela odorata (Spanish cedar) is a valuable multi‐purpose tree which Central American rural communities and farmers give priority to introducing in pastures and home gardens. In order to propose realistic methods for C. odorata production in local nurseries in the dry tropical region of Nicaragua, we studied: (a) the ability of locally collected C. odorata seeds to germinate, (b) seed response to storage under ambient conditions or under cold storage, (c) the effects of irradiance and watering during cultivation on seedling morphology and post‐transplantation survival, and (d) the effects of competition from grasses on C. odorata seedlings transplanted to pastures. Seed germination ranged from 55 to 66% and remained constant after 6 months of storage under ambient conditions or cold storage. C. odorata seedling morphology was sensitive to irradiation and watering in the nursery growing period. Deep shade reduced seedling biomass and leafiness and increased specific leaf area and root‐to‐shoot ratio. Water shortage increased root mass ratio and root‐to‐shoot ratio and decreased leaf mass ratio. Post‐transplantation success was favored by weeding, and was the highest for seedlings grown under deep shade and water restrictions.