Regional coexistence of ecologically similar species is facilitated when fluctuations in environmental conditions favor different species at different times or places. However, why species with similar ecology should vary in their response to environmental change is unclear. In this study, we explore the role of a life-history divergence in causing changes in relative fitness across environmental conditions experienced by populations of two closely related Ficedula flycatchers on the Baltic island of Oland, Sweden. We compared patterns of nestling survival between Pied (Ficedula hypoleuca) and Collared (F. albicollis) Flycatchers in relation to two factors known to influence the environment experienced by nestlings: natural variation in their parents' onset of breeding and artificial manipulation of the brood size. Possible differences in the location of the nests (i.e., microhabitat differences) or in habitat use (i.e., feeding patterns) by the adult birds were controlled for by partial cross-fostering of young between the two species. We found that nestling mortality was relatively higher among Collared Flycatchers and that this difference increased with later breeding. Mass gain, which predicted survival probability, of nestling Collared Flycatchers did not respond to the seasonal decline in environmental conditions when they were raised in nests with reduced brood size (i.e., where sibling competition was experimentally reduced). This latter result suggests that the smaller clutch size of Collared Flycatchers reflects an adaptive adjustment to their offspring's higher sensitivity to environmental change. We discuss the possibility that the divergence in life-history traits between the two species represents adaptation to different environments experienced during their recent evolutionary history. We conclude that the survival of nestling Collared Flycatchers is more sensitive to harsh environment and that this is likely to limit where and when the more aggressive Collared Flycatchers are able to displace Pied Flycatchers. Our results provide support for models of species coexistence that emphasize the importance of spatial or temporal heterogeneity in relative fitness or life-history divergence. More precisely, our results demonstrate that variation in life-history adaptations may result in changes in relative fitness of species across environments despite their use of similar resources.