We present a synthesis of empirical and theoretical work investigating how parasites influence competitive and predatory interactions between other species. We examine the direct and indirect effects of parasitism and discuss examples of density and parasite-induced trait-mediated effects. Recent work reveals previously unrecognized complexity in parasite-mediated interactions. In addition to parasite-modified and apparent competition leading to species exclusion or enabling coexistence, parasites and predators interact in different ways to regulate or destablize the population dynamics of their joint prey. An emerging area is the impact of parasites on intraguild predation (IGP). Parasites can increase vulnerability of infected individuals to cannibalism or predation resulting in reversed species dominance in IGP hierarchies. We discuss the potential significance of parasites for community structure and biodiversity, in particular their role in promoting species exclusion or coexistence and the impact of emerging diseases. Ongoing invasions provide examples where parasites mediate native/invader interactions and play a key role in determining the outcome of invasions. We highlight the need for more quantitative data to assess the impact of parasites on communities, and the combination of theoretical and empirical studies to examine how the effects of parasitism scale up to community-level processes.