Hybridization can generate novel phenotypes, and in combination with divergent selection along environmental gradients, can play a driving role in phenotypic diversification. This study examined the influence of introgressive hybridization and environmental variation on the phenotypic diversity of two pupfish species (Cyprinodon atrorus and Cyprinodon bifasciatus) endemic to the Cuatro Ciénegas basin, Mexico. These species occupy opposite environmental extremes and are comprised of multiple, intraspecifically isolated populations. However, interspecific hybridization occurs to various degrees within connecting, intermediate environments. Using geometric morphometric analysis, extensive variation of body shape was observed between and within species, and phenotypic variation was strongly correlated with environmental conditions. Furthermore, some introgressed populations exhibited unique phenotypes not found in either of the parents, and overall morphospace occupation was significantly higher in introgressed populations when compared to the parentals. Overall, we find environmental variation and transgressive segregation both appear to have been important in shaping phenotypic variation in this system.