Competition theory predicts that, when resources are limiting, interacting species should differ more in resource use where they co-occur, compared with where they do not (resource partitioning). The damselfishes Dascyllus aruanus and D. melanurus provide a useful test of this prediction because they exhibit largely allopatric geographic ranges that overlap near Port Moresby, Papua New Guinea. To test whether this species pair exhibited responses in resource use that were consistent with competition theory, the depth distributions, coral substrata and diet of each species at allopatric and sympatric locations were compared. Where sympatric, the frequency of co-occurrence was examined and foraging ranges and diet on corals where the species do and do not co-occur were compared. Contrary to expectations, the species were more similar in depth, habitat use and diet in the sympatric region. Within this location, they sometimes co-existed in the same coral shelters, but much less often than would be expected with random assortment. Where they did co-exist, their diets converged. D. melanurus exhibited restricted foraging ranges and consumed smaller prey in the presence of D. aruanus, but not vice versa. It was concluded that niche shifts along different resource axes at the geographic boundary are explained both by large-scale constraints in resource availability and local-scale competitive interactions.