Abstract Organisms and their resident microbial communities form a complex and mostly stable ecosystem. It is known that the specific composition and abundance of certain bacterial species affect host health and fitness, but the processes that lead to these microbial patterns are unknown. We investigate this by deconstructing the simple microbiome of the freshwater polyp Hydra . We contrast the performance of its two main bacterial associates, Curvibacter and Duganella , on germ free hosts with two in vitro environments over time. We show that interactions within the microbiome but also the host environment lead to the observed species frequencies and abundances. More specifically, we find that both microbial species can only stably coexist in the host environment, whereas Duganella outcompetes Curvibacter in both in vitro environments irrespective of initial starting frequencies. While Duganella seems to benefit through secretions of Curvibacter , its competitive effect on Curvibacter depends upon direct contact. The competition might potentially be mitigated through the spatial structure of the two microbial species on the host, which would explain why both species stably coexist on the host. Interestingly, the fractions of both species on the host do not match the fractions reported previously nor the overall microbiome carrying capacity as reported in this study. Both observations indicate that the rare microbial community members might be relevant for achieving the native community composition and carrying capacity. Our study highlights that for dissecting microbial interactions the specific environmental conditions need to be replicated, a goal difficult to achieve with in vitro systems. Importance This work studies microbial interactions within the microbiome of the simple cnidarian, Hydra , and investigates whether microbial species coexistence and community stability depends on the host environment. We find that the outcome of the interaction between the two most dominant bacterial species in Hydra ’s microbiome differs depending on the environment and only results in a stable coexistence in the host context. The interactive ecology between the host, the two most dominant microbes, but also the less abundant members of the microbiome, are critically important for achieving the native community composition. This indicates that the metaorganism environment needs to be taken into account when studying microbial interactions.