Species are commonly segregated along gradients of microclimate and vegetation. I explore the question of whether segregation is the result of microhabitat partitioning (biotic effects) or choice of differing microclimates (abiotic effects). I explored this question for four ground-nesting bird species that are segregated along a microclimate and vegetation gradient in Arizona. Birds shifted position of their nests on the microhabitat and microclimate gradient in response to changing precipitation over nine years. Similarly, annual bird abundance varied with precipitation across 12 yr. Those shifts in abundance and nesting microhabitat with changing precipitation demonstrate the importance of abiotic influences on bird distributions and habitat choice. However, nest-site shifts and microhabitat use also appear to be influenced by interactions among coexisting species. Moreover, shifts in habitat use by all species caused nest predation (i.e., biotic) costs that increased with increasing distance along the microclimate gradient. These results indicate that abiotic and biotic costs can strongly interact to influence microhabitat choice and abundances of coexisting species. Global climate change impacts have been considered largely in terms of simple distributional shifts, but these results indicate that shifts can also increase biotic costs when species move into habitat types for which they are poorly adapted or that create new biotic interactions.