Character displacement is the process by which traits evolve in response to selection to lessen resource competition or reproductive interactions between species. Although character displacement has long been viewed as an important mechanism for enabling closely related species to coexist, the causes and consequences of character displacement have not been fully explored. Moreover, character displacement in traits associated with resource use (ecological character displacement) has been largely studied independently of that in traits associated with reproduction (reproductive character displacement). In this review, we underscore the commonalities of these two forms of character displacement and discuss how they interact. We focus on the causes of character displacement and explore how character displacement can have downstream effects ranging from speciation to extinction. In short, understanding how organisms respond to competitive and reproductive interactions with heterospecifics offers key insights into the evolutionary causes and consequences of species coexistence and diversification.