We examine the effects of fecundity-limited attack rates and resistance of hosts to parasitism on the dynamics of two-host–one-parasitoid systems. We focus primarily on the situation where one parasitoid species attacks two host species that differ in their suitability for parasitism. While all eggs allocated to suitable hosts develop into adult parasitoids, some of the eggs allocated to marginal host do not develop. Marginal hosts can therefore act as a sink for parasitoid eggs. Three-species coexistence is favoured by low levels of parasitoid fecundity and by low levels of suitability of the marginal host. Our model also produces an indirect (+, −) interaction in which the suitable host can benefit from the presence of the marginal host, but the marginal host suffers from the presence of the suitable host. The mechanism driving the indirect (+, −) interaction is egg limitation of parasitoids incurred by allocating eggs to marginal hosts.