Ecological theory produces opposing predictions about whether differences in the timing of life history transitions, or ‘phenology’, promote or limit coexistence. Phenological separation is predicted to create temporal niche differences, increasing coexistence, yet phenological separation could also competitively favour one species, increasing fitness differences and hindering coexistence. We experimentally manipulated relative germination timing, a critical phenological event, of two annual grass species, Vulpia microstachys and V. octoflora, to test these contrasting predictions. We parameterized a competition model to estimate within-season niche differences, fitness differences, and coexistence, and to estimate coexistence when year-to-year fluctuations of germination timing occur. Increasing germination separation caused parallel changes in niche and fitness differences, with the net effect of weakening within-year coexistence. Both species experienced a competitive advantage by germinating earlier and a four-day head start allowed the generally inferior competitor to exclude the otherwise superior competitor. The overall consequence of germination separation was to limit coexistence within a given year, although year-to-year variation in relative timing of germination was sufficient to support long-term coexistence. Our results clarify how phenological differences structure competitive interactions and highlight the need to quantify year-to-year variation in these differences to better understand species coexistence.