The competition–predation hypothesis has been widely used for many years to explain the segregation along moisture gradients by species of dusky salamanders (genus Desmognathus) along Appalachian streams. According to this idea, all species originally favored aquatic sites, and large, aggressive species displaced smaller ones to more terrestrial habitats, both ecologically and evolutionarily. We tested this hypothesis by investigating the role of a recently described, previously unsuspected member (D. folkertsi) of this assemblage. This species coexists in widespread sympatry with its larger, cryptic congener, D. quadramaculatus. The competition–predation hypothesis predicts that the smaller D. folkertsi is displaced to more terrestrial habitats by the larger, aggressive D. quadramaculatus. We did not find D. folkertsi farther from water than D. quadramaculatus. However, in streams where they are sympatric, D. folkertsi was more abundant in small tributaries while D. quadramaculatus predominated along the main stem. This pattern is consistent with niche compression associated with interspecific competition. In behavioral trials to test interactions between these two species, neither species from sympatric populations avoided other salamanders or their chemical cues. Salamander–salamander aggression also appeared to be reduced. Each species from allopatric sites avoided other salamanders, regardless of species, and D. quadramaculatus significantly avoided chemical cues of other salamanders. While the general idea of the competition–predation hypothesis held, specific predictions failed. Therefore, we propose the competition–predation hypothesis be modified to account for each species of Desmognathus having a unique fundamental niche that then influences how they interact with sympatric congeners.