Intraspecific diet variation is widespread, but the causes and consequences of individual foraging strategies are unclear. Interactions between competition and resources dictate foraging strategies, but classical paradigms like optimal foraging and niche theory offer contrasting predictions for individual consumers. Further, both paradigms assume that individual foraging strategies optimize fitness, yet this prediction is rarely tested. We used over 3,500 stable isotope measurements and six years of capture-mark-recapture data to quantify the relationship between environmental variation, individual foraging, and consumer fitness in four desert rodent species. Consistent with niche theory, we found that individuals contracted their dietary niches and increased specialisation in response to both intraspecific and interspecific competition, but the effect was mediated by resource abundance. However, individual specialists obtained no apparent fitness benefit from dietary niche contractions and exhibited lower survival than generalists. These results suggest diet-mediated fitness consequences can regulate population and community dynamics in stochastic resource environments.