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The behavior of organisms can contribute to the transformation of their environments. When organismal impacts on the environment feed back to influence organismal density, viability, fertility, or persistence, the environment can be construed as an extension of the organism. This process of fitness‐enhancing environmental transformation has been called niche construction. We focus on the relationship of niche construction with species or strain diversity and on the variability of investment in niche construction versus reproduction. We demonstrate a fundamental dilemma of niche construction, whereby the construction of a shared resource leads to a tragedy of the commons, with competition tending to eliminate niche construction strategies. The ability to monopolize a niche, either through spatial proximity or through preferential exploitation, can stabilize niche construction and promote ecological coexistence …