ABSTRACT The mechanisms facilitating coexistence of cryptic species in sympatry have long puzzled ecologists. Cryptic species have nearly identical morphology and, therefore, would be presumed to have high niche overlap and potential for interspecific competition and competitive exclusion when resources are limited. Lowland rivers in South America have hundreds of coexisting fish species, with some congeneric species having similar functional morphology. Here, we document the distributions and compare habitat use of two peacock bass, Cichla cataractae and C. ocellaris , that have nearly identical functional morphology. These piscivorous cichlids are generalist feeders and coexist over a broad region within the Essequibo River Basin in the Guiana Shield region of South America. Data were collected on regional distribution, habitat use and body size to estimate niche overlap. Field research was conducted during the dry season when habitat and food resources are most limited and the potential for competition should be strongest. The two species were found to have negligible overlap in microhabitat use. Cichla cataractae almost exclusively inhabited rocky shoals located in river channels, whereas C. ocellaris occurred mostly within lentic habitats in the floodplain and near‐shore areas of channels. This high degree of niche segregation contrasts with the assumption that high morphological similarity should yield high niche overlap and that behavioural and/or physiological differences can be the principal mechanism for niche partitioning.