Wallace proposed in 1868 that natural rather than sexual selection could explain the striking differences in avian plumage dichromatism. Thus, he predicted that nesting habits, through their association with nest predation, could drive changes in sexual dichromatism by enabling females in cavity nesters to become as conspicuous as males, whereas Darwin (1871, The Descent of Man and Selection in Relation to Sex, John Murray, London) argued that sexual selection was the sole explanation for dichromatism. Sexual dichromatism is currently used as indicating the strength of sexual selection, and therefore testing Wallace’s claim with modern phylogentically controlled methodologies is of prime interest for comparing the roles of natural and sexual selection in affecting the evolution of avian coloration. Here, we have related information on nest attendance, sexual dichromatism and nesting habits (open and cavity nesting) to male and female plumage conspicuousness in European passerines. Nest incubation attendance does not explain male or female plumage conspicuousness but nest type does. Moreover, although females of monochromatic and cavity nesting species are more conspicuous than females of other species, males of monochromatic and open nesting species are those with more cryptic plumage. Finally, analyses of character evolution suggest that changes in nesting habits influence the probability of changes in both dichromatism and plumage conspicuousness of males but do not significantly affect those in females. These results strongly suggest a role of nesting habits in the evolution of plumage conspicuousness of males, and a role for sexual selection also in females, both factors affecting the evolution of sexual dichromatism. We discuss our findings in relation to the debate that Darwin and Wallace maintained more than one century ago on the importance of natural and sexual selection in driving the evolution of plumage conspicuousness and sexual dichromatism in birds, and conclude that our results partly support the evolutionary scenarios envisaged by both extraordinary scientists.