Patch occupancy theory predicts that a trade-off between competition and dispersal should lead to regional coexistence of competing species. Empirical investigations, however, find local coexistence of superior and inferior competitors, an outcome that cannot be explained within the patch occupancy framework because of the decoupling of local and spatial dynamics. We develop two-patch metapopulation models that explicitly consider the interaction between competition and dispersal. We show that a dispersal-competition trade-off can lead to local coexistence provided the inferior competitor is superior at colonizing empty patches as well as immigrating among occupied patches. Immigration from patches that the superior competitor cannot colonize rescues the inferior competitor from extinction in patches that both species colonize. Too much immigration, however, can be detrimental to coexistence. When competitive asymmetry between species is high, local coexistence is possible only if the dispersal rate of the inferior competitor occurs below a critical threshold. If competing species have comparable colonization abilities and the environment is otherwise spatially homogeneous, a superior ability to immigrate among occupied patches cannot prevent exclusion of the inferior competitor. If, however, biotic or abiotic factors create spatial heterogeneity in competitive rankings across the landscape, local coexistence can occur even in the absence of a dispersal-competition trade-off. In fact, coexistence requires that the dispersal rate of the overall inferior competitor not exceed a critical threshold. Explicit consideration of how dispersal modifies local competitive interactions shifts the focus from the patch occupancy approach with its emphasis on extinctioncolonization dynamics to the realm of source-sink dynamics. The key to coexistence in this framework is spatial variance in fitness. Unlike in the patch occupancy framework, high rates of dispersal * Present address: Department of Ecology and Evolution, University of Chicago, Chicago, Illinois 60637-1573; e-mail: amarasek@uchicago.edu. † E-mail: nisbet@lifesci.ucsb.edu.Am. Nat. 2001. Vol. 158, pp. 572- can undermine coexistence, and hence diversity, by reducing spatial variance in fitness.Keywords: competition, coexistence, spatial heterogeneity, source-sink dynamics, immigration, dispersal-competition trade-off.The issue of how species coexist in patchy environments is central to both basic and applied ecology. When competition for resources is asymmetric, a life-history tradeoff between competitive and dispersal abilities can lead to coexistence in a patchy environment (Skellem 1951). This idea has been formalized in the patch occupancy metapopulation framework (Levins 1969(Levins , 1970. The patch occupancy approach assumes that local competitive interactions occur on a much faster time scale relative to extinction-colonization dynamics (Cohen 1970;Levins and Culver 1971;Slatkin 1974;Hastings 1980;Nee and May 1992;Tilman et al. 1994). For instance,...