Character displacement – the divergence of traits between species in response to competition for resources or mates – has long been viewed as a major cause of adaptive diversification and species coexistence. Yet, we lack answers to basic questions concerning the causes and consequences of character displacement, not the least of which is why some species are more prone than others to undergo character displacement. Here, we address these questions by describing how character displacement can proceed through two nonexclusive routes that differ in the source of phenotypic variation, and, hence, in the ease with which character displacement may unfold. During in situ evolution of novel phenotypes, new traits that are divergent from a heterospecific competitor are generated and spread in sympatry. During sorting of pre-existing variation, such traits are initially favoured in allopatry before the two species encounter one another. Later, when they come into contact, character displacement transpires when these pre-existing divergent phenotypes increase in frequency in sympatry relative to allopatry. Because such sorting of pre-existing variation should unfold relatively rapidly, we suggest that species that express resource or mating polymorphism prior to interactions with heterospecifics may be more prone to undergo character displacement. We discuss the key differences between these two routes, review possible examples of each, and describe how the distinction between them provides unique insights into the evolutionary consequences of species interactions, the origins of diversity, and the factors that govern species coexistence.