Character displacement can reduce costly interspecific interactions between young species. We investigated the mechanisms behind divergence in three key traits - breeding habitat choice, timing of breeding and plumage coloration - in Ficedula flycatchers. We found that male pied flycatchers became expelled from the preferred deciduous habitat into mixed forest as the superior competitor, collared flycatchers, increased in numbers. The peak in food abundance differs between habitats, and the spatial segregation was paralleled by an increased divergence in timing of breeding between the two species. Male pied flycatchers vary from brown to black with brown coloration being more frequent in sympatry with collared flycatchers, a pattern often proposed to result from selection against hybridization, i.e. reinforcement. In contrast to this view, we show that brown male pied flycatchers more often hybridize than black males. Male pied flycatcher plumage coloration influenced the territory obtained in areas of co-occurrence with collared flycatchers, and brown male pied flycatchers experienced higher relative fitness than black males when faced with heterospecific competition. We suggest that allopatric divergence in resource defense ability causes a feedback loop at secondary contact where male pied flycatchers with the most divergent strategy compared to collared flycatchers are favored by selection.