The history of life is punctuated by repeated periods of unusually rapid evolutionary diversification called adaptive radiation. The dynamics of diversity during a radiation reflect an overshooting pattern with an initial phase of exponential-like increase followed by a slower decline. Much attention has been paid to the factors that drive the increase phase, but far less is known about the causes of the decline phase. Decreases in diversity are rarely associated with climatic changes or catastrophic events, suggesting that they may be an intrinsic consequence of diversification. We experimentally identify the factors responsible for losses in diversity during the later stages of the model adaptive radiation of the bacterium Pseudomonas fluorescens. Proximately, diversity declines because of the loss of biofilm-forming niche specialist morphotypes. We show that this loss occurs despite the presence of strong divergent selection late in the radiation and is associated with continued adaptation of resident niche specialists to both the biotic and abiotic environments. These results suggest that losses of diversity in the latter stages of an adaptive radiation may be a general consequence of diversification through competition and lends support to the idea that the conditions favouring the emergence of diversity are different from those that ensure its long-term maintenance.