Production of diapausing eggs in many zooplankton species occurs after partial switching from parthenogenesis to sexual reproduction. Storage effect theory predicts the stable long-term coexistence of competitors investing in diapausing stages, but it does not address the effect of such investment on short-term coexistence. The freshwater rotifer Brachionus calyciflorus and the cladoceran Moina micrura were used in this study to test experimentally if diapause could promote coexistence of active individuals under inter-specific competition. Our results show that B. calyciflorus was more affected by inter-specific competition and exhibited a greater and earlier production of resting eggs compared with M. micrura. Costs of diapause investment in Moina were only observed in competition. This was translated into reduced probability of B. calyciflorus of being outcompeted by M. micrura. We show that investment in diapause might promote local and short-term coexistence of competing zooplankton species. Our study strongly suggests that the ecological effects of diapause encompass a wider range of temporal scales, from weekly to decadal, and levels of organization, from individuals to communities, than previously thought.