Climate change and harvesting can affect the ecosystems' functioning by altering the population dynamics and interactions among species. Knowing how species interact is essential for better understanding potentially unintended consequences of harvest on multiple species in ecosystems. I analyzed how stage‐specific interactions between two harvested competitors, the haddock (
Melanogrammus aeglefinus
) and Atlantic cod (
Gadus morhua
), living in the Barents Sea affect the outcome of changes in the harvest of the two species. Using state‐space models that account for observation errors and stochasticity in the population dynamics, I run different harvesting scenarios and track population‐level responses of both species. The increasing temperature elevated the number of larvae of haddock but did not significantly influence the older age‐classes. The nature of the interactions between both species shifted from predator‐prey to competition around age‐2 to ‐3. Increased cod fishing mortality, which led to decreasing abundance of cod, was associated with an increasing overall abundance of haddock, which suggests compensatory dynamics of both species. From a stage‐specific approach, I show that a change in the abundance in one species may propagate to other species, threatening the exploited species' recovery. Thus, this study demonstrates that considering interactions among life history stages of harvested species is essential to enhance species' co‐existence in harvested ecosystems. The approach developed in this study steps forward the analyses of effects of harvest and climate in multi‐species systems by considering the comprehension of complex ecological processes to facilitate the sustainable use of natural resources.