Several lines of evidence suggest that the species diversity and composition of communities should depend on genetic diversity within component species, but there has been very little effort to directly assess this possibility. Here I use models of competition among genotypes and species to demonstrate a strong positive effect of the number of genotypes per species on species diversity across a range of conditions. Genetic diversity allows species to respond to selection imposed by competition, resulting in both functional convergence and divergence among species depending on their initial niche positions. This ability to respond to selection promotes species coexistence and contributes to a reduction in variation in species composition among communities. These models suggest that whenever individual fitness depends on the degree of functional similarity between a focal individual and its competitors, genetic diversity should promote species coexistence; this prediction is consistent with the few relevant empirical data collected to date. The results point to the importance of considering the genetic origin and diversity of material used in ecological experiments and in restoration efforts, in addition to highlighting potentially important community consequences of the loss of genetic diversity in natural populations.