A fundamental goal of evolutionary biology is to understand how ecological diversity arises and is maintained in natural populations. We have investigated the contributions of gene flow and divergent selection to the distribution of genetic variation in an ecologically-differentiated population of a thermophilic cyanobacterium (Mastigocladus laminosus) found along the temperature gradient of a nitrogen-limited stream in Yellowstone National Park. For most loci sampled, gene flow appears to be sufficient to prevent substantial genetic divergence. However, one locus (rfbC) exhibited a comparatively low migration rate as well as other signatures expected for a gene experiencing spatially varying selection, including an excess of common variants, an elevated level of polymorphism and extreme genetic differentiation along the gradient. rfbC is part of an expression island involved in the production of the polysaccharide component of the protective envelope of the heterocyst, the specialized nitrogen-fixing cell of these bacteria. SNP-genotyping in the vicinity of rfbC revealed a ~5 kbp region including a gene content polymorphism that is tightly associated with environmental temperature and therefore likely contains the target of selection. Two genes have been deleted both in the predominant haplotype found in the downstream region of White Creek and in strains from other Yellowstone populations of M. laminosus, which may result in the production of heterocysts with different envelope properties. This study implicates spatially varying selection in the maintenance of variation related to thermal performance at White Creek despite on-going or recent gene flow.