We compare the observed size distribution of circumstellar discs in the Orion Trapezium cluster with the results of N-body simulations in which we incorporated an heuristic prescription for the evolution of these discs. In our simulations, the sizes of stellar discs are affected by close encounters with other stars (with discs). We find that the observed distribution of disc sizes in the Orion Trapezium cluster is excellently reproduced by truncation due to dynamical encounters alone. The observed distribution appears to be a sensitive measure of the past dynamical history of the cluster, and therewith on the conditions of the cluster at birth. The best comparison between the observed disc-size distribution and the simulated distribution is realized with a cluster of N = 2500 ± 500 stars with a half-mass radius of about 0.5 pc in virial equilibrium (with a virial ratio of Q = 0.5, or somewhat colder Q ≃ 0.3), and with a density structure according to a fractal dimension of F ≃ 1.6. Simulations with these parameters reproduce the observed distribution of circumstellar discs in about 0.2-0.5 Myr. We conclude that the distribution of disk sizes in the Orion Trapezium cluster is the result of dynamical interactions in the early evolution of the cluster.