Selection imposed by coinfection may vary with the mechanism of within-host competition between parasites. Exploitative competition is predicted to favor more virulent parasites, whereas interference competition may result in lower virulence. Here, we examine whether exploitative or interference competition determines the outcome of competition between two nematode species (Steinernema spp.), which in combination with their bacterial symbionts (Xenorhabdus spp.), infect and kill insect hosts. Multiple isolates of each nematode species, carrying their naturally associated bacteria, were characterized by (1) the rate at which they killed insect hosts, and by (2) the ability of their bacteria to interfere with each other's growth via bacteriocidal toxins called “bacteriocins.” We found that both exploitative and interference abilities were important in predicting which species had a selective advantage in pairwise competition experiments. When nematodes carried bacteria that did not interact via bacteriocins, the faster killing isolate had a competitive advantage. Alternatively, nematodes could gain a competitive advantage when they carried bacteria able to inhibit the bacteria of their competitor. Thus, the combination of nematode/bacterial traits that led to competitive success depended on which isolates were paired, suggesting that variation in competitive interactions may be important for maintaining species diversity in this community.