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While it is universally recognised that environmental factors can cause phenotypic trait variation via phenotypic plasticity, the extent to which causal processes operate in the reverse direction has received less consideration. In fact individuals are often active agents in determining the environments, and hence the selective regimes, they experience. There are several important mechanisms by which this can occur, including habitat selection and niche construction, that are expected to result in phenotype–environment correlations (i.e. non-random assortment of phenotypes across heterogeneous environments). Here we highlight an additional mechanism – intraspecific competition for preferred environments – that may be widespread, and has implications for phenotypic evolution that are currently underappreciated. Under this mechanism, variation among individuals in traits determining their competitive ability leads to phenotype–environment correlation; more competitive phenotypes are able to acquire better patches. Based on a concise review of the empirical evidence we argue that competition-induced phenotype–environment correlations are likely to be common in natural populations before highlighting the major implications of this for studies of natural selection and microevolution. We focus particularly on two central issues. First, competition-induced phenotype–environment correlation leads to the expectation that positive feedback loops will amplify phenotypic and fitness variation among competing individuals. As a result of being able to acquire a better environment, winners gain more resources and even better phenotypes – at the expense of losers. The distinction between individual quality and environmental quality that is commonly made by researchers in evolutionary ecology thus becomes untenable. Second, if differences among individuals in competitive ability are underpinned by heritable traits, competition results in both genotype–environment correlations and an expectation of indirect genetic effects (IGEs) on resource-dependent life-history traits. Theory tells us that these IGEs will act as (partial) constraints, reducing the amount of genetic variance available to facilitate evolutionary adaptation. Failure to recognise this will lead to systematic overestimation of the adaptive potential of populations. To understand the importance of these issues for ecological and evolutionary processes in natural populations we therefore need to identify and quantify competition-induced phenotype–environment correlations in our study systems. We conclude that both fundamental and applied research will benefit from an improved understanding of when and how social competition causes non-random distribution of phenotypes, and genotypes, across heterogeneous environments.