Many phytoplankton species produce toxic substances, but their functional role is unclear. Specifically, it remains uncertain whether these compounds have a toxic or deterrent effect on grazers; only, the latter is consistent with toxins as defensive tools. Here, we show that 10 of 12 species or strains of toxic dinoflagellates were consumed at lower rates than a similarly sized nontoxic dinoflagellate by a copepod. Through video observations of individual prey-grazer interactions, we further demonstrate that the dominating mechanism is through capture, examination, and subsequent rejection of vital cells, that is, a true deterrent effect that offers a straightforward explanation to its evolution. We argue that the diversity of grazer responses to toxic phytoplankton reported in the literature, including toxic effects, and the high diversity of toxin profiles between strains of the same phytoplankton species reflect different stages of an ever-ongoing evolutionary arms race, facilitated by rapid adaptation of grazers to toxic substances. We further argue that defensive toxicity requires a chemical signal exterior to the cell that informs the grazer about the toxicity of the cell. The signal can be the toxin itself or just an aposematic signal of toxicity. In the former case, allelochemical effects may emerge at high cell concentrations as a nonadaptive side effect of a predator defenses.