Explaining the enormous biodiversity observed in bacterial communities is challenging because ecological theory predicts that competition between species occupying the same niche should lead to the exclusion of less competitive community members. Competitive exclusion should be particularly strong when species compete for a single limiting resource or live in unstructured habitats that offer no refuge for weaker competitors. Here, we describe the ‘cheating effect’, a form of intra-specific competition that can counterbalance between-species competition, thereby fostering biodiversity in unstructured habitats. Using experimental communities consisting of the strong competitor Pseudomonas aeruginosa (PA) and its weaker counterpart Burkholderia cenocepacia
(BC), we show that co-existence is impossible when the two species compete for a single limiting resource, iron. However, when introducing a PA cheating mutant, which specifically exploits the iron scavenging siderophores produced by the PA wild type, we found that biodiversity was preserved under well-mixed conditions where PA cheats could outcompete the PA wild type. Cheating fosters biodiversity in our system because it creates strong intra-specific competition, which equalises fitness differences between PA and BC. Our study identifies cheating – typically considered a destructive element – as a constructive force in shaping biodiversity.