Habitat selection behavior is affected by complex interplays between competing requirements. Here we combine field observations with laboratory experiments to examine how thermal benefits and predator avoidance influences habitat selection by different color morphs of the pygmy grasshopper Tetrix undulata. The composition of substrate types and surface temperatures in areas selected by free-ranging individuals did not reflect relative availability, and varied among morphs and sexes. Surface temperatures of selected habitats deviated less from the range of preferred body temperatures than would result from a random utilization of surface temperatures, suggesting that grasshoppers selected habitats with thermal properties which were suitable for maintaining preferred body temperatures. The thermal property of habitats occupied by different color morphs suggests that darker morphs (which absorb more solar radiation) selected cooler habitats to avoid overheating. Dissimilarities in substrate use among color morphs in the field and laboratory emphasize a role also of predator avoidance by background matching for habitat choice. The degree of habitat selectivity was lowest in the striped morph, supporting the notion that a disruptive color pattern may constitute a solution to the trade-off between relative crypsis in different visual backgrounds. Finally, individuals modified their habitat use when subjected to elevated risk of predation, showing that habitat choice is governed by conflicting priorities. Collectively, our findings suggest that, as a result of direct and indirect effects of coloration on performance, alternative color morphs use different solutions to the trade-off between competing requirements. Our results also lend support to the notion that relative fitness of alternative color morphs and sexes may be dependent on microhabitat selection, as predicted by the theory of multiple niche polymorphisms.