Competition is a ubiquitous factor in natural populations and has been reported to alter the ecological impact of xenobiotics. We investigated conditions that mirror the natural variation of environmental factors. For this, different treatments were applied to 96 outdoor pond microcosms by shading the ponds and harvesting the communities. Then, the effect of esfenvalerate (0.03, 0.3, and 3 μg/L) on populations of Daphnia spp. was investigated. The pesticide effect and the sensitivity of Daphnia spp. in the context of a zooplankton community was increased by intraspecific competition 11 days after contamination. This relationship was most pronounced at 0.03 and 0.3 μg/L esfenvalerate, which were the concentrations that led to partial mortality. In contrast, interspecific interaction did not significantly alter the effect of the toxicant on Daphnia spp. Modelled concentration–response curves showed that the negative effects of the pesticide differed by a factor of up to 100 depending on the strength of intraspecific competition. In addition, a wider range of concentrations led to negative effects at high levels of intraspecific competition than at low levels. We argue that increased intraspecific competition reduces the availability of resources at the individual level and thereby increases the effect of contaminants. This knowledge about the interaction between competition and the response to toxicants is important in assessing the effects of these factors under field conditions.