Big bluestem (Andropogon gerardii) is an ecologically dominant grass with wide distribution across the environmental gradient of U.S. Midwest grasslands. This system offers an ideal natural laboratory to study the nature of population divergence and adaptation in spatially varying climates. Objectives were to: (i) characterize neutral genetic diversity and structure within and among three regional ecotypes derived from 11 prairies across the U.S. Midwest environmental gradient, (ii) distinguish between the relative roles of isolation-by-distance (IBD) vs. isolation-by-environment (IBE) on ecotype divergence, (iii) identify outlier loci under selection, and (iv) assess the association between outlier loci and climate. Using two primer sets, we genotyped 378 plants at 384 polymorphic AFLP loci across regional ecotypes from central and eastern Kansas, and Illinois. Neighbor-joining tree and PCA revealed strong genetic differentiation between Kansas and Illinois ecotypes, which was better explained by IBE than IBD. High genetic variability within prairies was found (80%) and even fragmented Illinois prairies, surprisingly, contain high within-prairie genetic diversity (92%). Using Bayenv2, we identified 14 top-ranked outlier loci among ecotypes to be associated with temperature and precipitation variables. Six of seven BayeScan FST-outliers were also found in common with Bayenv2 outliers. High genetic diversity may enable big bluestem populations to better withstand changing climates; however, population divergence supports the use of local ecotypes in grassland restoration. Knowledge of genetic variation in this ecological dominant and other grassland species will be critical to understanding grassland response and restoration challenges in the face of a changing climate.