Theoretical models suggest that overlapping generations, in combination with a temporally fluctuating environment, may allow the persistence of competitors that otherwise would not coexist. Despite extensive theoretical development, this "storage effect" hypothesis has received little empirical attention. Herein I present the first explicit mathematical analysis of the contribution of the storage effect to the dynamics of competing natural populations. In Oneida Lake, NY, data collected over the past 30 years show a striking negative correlation between the water-column densities of two species of suspension-feeding zooplankton, Daphnia galeata mendotae and Daphnia pulicaria. I have demonstrated competition between these two species and have shown that both possess long-lived eggs that establish overlapping generations. Moreover, recruitment to this long-lived stage varies annually, so that both daphnids have years in which they are favored (for recruitment) relative to their competitor. When the long-term population growth rates are calculated both with and without the effects of a variable environment, I show that D. galeata mendotae clearly cannot persist without the environmental variation and prolonged dormancy (i.e., storage effect) whereas D. pulicaria persists through consistently high per capita recruitment to the long-lived stage.