Causal evidence linking resource competition to species divergence is scarce. In this study, we coupled field observations with experiments to ask if the degree of character displacement reflects the intensity of competition between two closely related spadefoot toads (Spea bombifrons and S. multiplicata). Tadpoles of both species develop into either a small-headed omnivorous morph, which feeds mostly on detritus, or a large-headed carnivorous morph, which specializes on and whose phenotype is induced by fairy shrimp. Previously, we found that S. multiplicata are inferior competitors for fairy shrimp and are less likely to develop into carnivores in sympatry with S. bombifrons. We compared four key trophic characters in S. multiplicata across natural ponds where the frequency of S. bombifrons varied. We found that S. multiplicata became increasingly more omnivore-like as the relative abundance of S. bombifrons increased. Moreover, in controlled laboratory populations, S. multiplicata became increasingly more omnivore-like and S. bombifrons became increasingly more carnivore-like as we increased the relative abundance of the other species. Phenotypic plasticity helped mediate this divergence: S. multiplicata became increasingly less likely to eat shrimp and develop into carnivores in the presence of S. bombifrons, a superior predator on shrimp. However, divergence also reflected differences in canalized traits: When reared under common conditions, S. multiplicata tadpoles became increasingly less likely to produce carnivores as their natal pond decreased in elevation. Presumably, this pattern reflected selection against carnivores in lower-elevation ponds, because S. bombifrons became increasingly more common with decreasing elevation. Local genetic adaptation to the presence of S. bombifrons was remarkably fine grained, with differences in carnivore production detected between populations a few kilometers apart. Our results suggest that the degree of character displacement potentially reflects the intensity of competition between interacting species and that both phenotypic plasticity and fine-scale genetic differentiation can mediate this response. Moreover, these results provide causal evidence linking resource competition to species divergence.