Like other group-living species, humans often display parochial cooperation, that is they cooperate with ingroup members more than with outgroup members and strangers. Theoretically, parochial cooperation should imply that people also compete less with ingroup members than with outgroup members and strangers. However, in situations where people could invest to take other’s resources, and invest to protect against such exploitation, we observed the opposite pattern. Akin to what in other species is known as the ‘nasty neighbour effect’, in such dyadic contests people invested more (rather than less) with ingroup members than with out-group members and strangers across 51 nations, in different communities in Kenya, and in on-line samples from the United Kingdom. This ‘nasty neighbour’ behaviour emerged independent of parochial cooperation and trust towards others that have the same (versus different) nationality and, fitting field-observations in other species, neighbour nastiness emerges when people perceive within-group resource scarcity, and especially towards low-ranking ingroup members. That humans can exhibit both parochialism and nastiness within groups is difficult to reconcile with existing theories on the evolution of cooperation in structured populations.