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The prediction that environmental fluctuations may destabilise populations and yet stabilise aggregate community properties has remained largely untested. We examined population and community stability under constant and fluctuating temperatures in simple planktonic assemblages of differing algal richness. Temperature dependent resource competition produced a highly asymmetric community structure where algal community biomass was dominated by one species. For a given level of species richness, temperature fluctuations induced lower community covariance and thus stabilised community biomass. However, increasing algal species richness increased the variability of population abundance and growth rates, as well as population and community variability. Consumer dynamics were directly destabilised by environmental fluctuations. These results confirm recent theoretical studies suggesting a stabilising effect of environmental fluctuations at the community level. However, they also support the theoretical prediction that increasing species richness may be of limited value for community stability, most especially in asymmetric communities, when competition directly affects population variability.