The role of hybridization in the evolution of animal species is poorly understood. Transgressive segregation is a mechanism through which hybridization can generate diversity and ultimately lead to speciation. In this report we investigated the capacity of hybridization to generate novel (transgressive) phenotypes in the taxonomically diverse cichlid fishes. We generated a large F2 hybrid population by crossing two closely related cichlid species from Lake Malawi in Africa with differently shaped heads. Our morphometric analysis focused on two traits with different selective histories. The cichlid lower jaw (mandible) has evolved in response to strong directional selection, and does not segregate beyond the parental phenotype. The cichlid neurocranium (skull) has likely diverged in response to forces other than consistent directional selection (e.g., stabilizing selection), and exhibits marked transgressive segregation in our F2 population. We show that the genetic architecture of the cichlid jaw limits transgression, whereas the genetic basis of skull shape is permissive of transgressive segregation. These data suggest that natural selection, acting through the genome, will limit the degree of diversity that may be achieved via hybridization. Results are discussed in the context of the broader question of how phenotypic diversity may be achieved in rapidly evolving systems.