Organisms often perceive predation risk through visual, auditory, or chemical cues that accompany or persist after an attack on other prey individuals. In this paper an argument is developed that suggests that it is adaptive for species that use such indirect cues to include conspecific density in the assessment of predation risk, and to respond to conspecific density by modifying phenotype (e.g. behavior, morphology of life history). A model based on this argument predicts that at equivalent (including negligible) indirect cue levels an organism should adopt less vulnerable phenotypes at lower conspecific density. Further, the phenotypic modifications to differences in conspecific density are predicted to be on the same order of magnitude as phenotypic responses to differences in predator density, to be more pronounced at higher indirect cue levels, and can be extended to responses to differences in the density of heterospecific species that share predators. This “risk assessment” mechanism is qualitatively different from other mechanisms, such as the dilution and “many eyes” effects that predict behavioral responses to conspecific density. If species use conspecific or heterospecific density to assess predation risk as predicted, there may be implications for the role and evolution of traits used to perceive conspecific and heterospecific densities, species aggregation, and population dynamics, and should be considered in the design of experiments of nonlethal effects of predators.