When provisioning offspring, mothers balance the benefits of producing a few large, fitter offspring with the costs of decreased fecundity. The optimal balance between offspring size and fecundity depends on the environment. Theory predicts that larger offspring have advantages in adverse conditions, but in favorable conditions size is less important. Thus, if environmental quality varies, selection should favor mothers that adaptively allocate resources in response to local conditions to maximize maternal fitness. In the bryozoan Bugula neritina, we show that the intensity of intraspecific competition dramatically changes the offspring size/performance relationship in the field. In benign or extremely competitive environments, offspring size is less important, but at intermediate levels of competition, colonies from larger larvae have higher performance than colonies from smaller larvae. We predicted mothers should produce larger offspring when intermediate competition is likely and tested these expectations in the field by manipulating the density of brood colonies. Our findings matched expectations: mothers produced larger larvae at high densities and smaller larvae at low densities. In addition, mothers from high-density environments produced larvae that have higher dispersal potential, which may enable offspring to escape crowded environments. It appears mothers can adaptively adjust offspring size to maximize maternal fitness, altering the offspring phenotype across multiple life-history stages.