The relative importance of food quality and enemy-reduced space is a central but unresolved issue in the evolutionary ecology of host use by phytophagous insects. Indeed, a practical obstacle to experimentally disentangling the functional roles of these factors is the host specificity of insect herbivores, particularly toxic plant specialists. In this study, we employ a toxic plant generalist to uniquely disentangle these alternative explanations. We experimentally demonstrate that the value of enemy-reduced space supersedes that of food quality in determining the diet and host preference of the polyphagous woolly bear caterpillar Grammia geneura (Lepidoptera: Arctiidae). Caterpillars sacrificed superior growth efficiency in choosing a mixed diet that included toxic host plants and provided resistance against parasitoids. The resistance of individual caterpillars was associated with the relative amount of defensive plants eaten as well as with the sequestration of pyrrolizidine alkaloids from one such plant (Senecio longilobus).