The island rule is the phenomenon of the miniaturization of large animals and the gigantism of small animals on islands, with mammals providing the classic case studies. Several explanations for this pattern have been suggested, and departures from the predictions of this rule are common among mammals of differing body size, trophic habits, and phylogenetic affinities. Here we offer a new explanation for the evolution of body size of large insular mammals, using evidence from both living and fossil island faunal assemblages. We demonstrate that the extent of dwarfism in ungulates depends on the existence of competitors and, to a lesser extent, on the presence of predators. In contrast, competition and predation have little or no effect on insular carnivore body size, which is influenced by the nature of the resource base. We suggest dwarfism in large herbivores is an outcome of the fitness increase resulting from the acceleration of reproduction in low-mortality environments. Carnivore size is dependent on the abundance and size of their prey. Size evolution of large mammals in different trophic levels has different underlying mechanisms, resulting in different patterns. Absolute body size may be only an indirect predictor of size evolution, with ecological interactions playing a major role.