Understanding how environmental fluctuations affect the stability of populations and communities is complex, for example, because direct effects of environmental variability on populations may be modified and propagated across communities by species interactions. One way to explore and further understand these complexities is via a factorial manipulation of community composition and environmental conditions. Using laboratory based aquatic microcosms we manipulated environmental fluctuation by creating two environments; one with variable light and one with constant light. Within these environments, community composition was manipulated by constructing communities from all possible combinations of three species that vary in their reliance on light for growth (an autotroph: a diatom completely reliant on light, a heterotroph: a Paramecium species not reliant on light, and a mixotroph: a Paramecium species somewhat reliant on light). Community composition was predicted to affect populations and communities by introducing and altering competitive interactions between species and affecting the degree of niche differentiation between species. We found that population stability was predominantly influenced by an interaction between community composition and environmental variability, whereby the effect of environmental variability synergistically combined with effects of community composition to reduce population stability. Covariance of populations was determined by an interaction between community composition and environmental variability, though this did not result from the effect of niche differentiation between species. Species interactions drove correlations between population biomass and the environment which otherwise did not exist. Our results demonstrate the complex and interrelated effects of abiotic and biotic factors on population and community stability, and suggest the need to consider aspects of community composition when predicting the impact of environmental fluctuations.