Abstract The evolutionary transition to multicellularity has occurred on numerous occasions, but transitions to complex life forms are rare. Here, using experimental bacterial populations as proxies for nascent multicellular organisms, we manipulate ecological factors shaping the evolution of groups. Groups were propagated under regimes requiring reproduction via a life cycle replete with developmental and dispersal (propagule) phases, but in one treatment lineages never mixed, whereas in a second treatment, cells from different lineages experienced intense competition during the dispersal phase. The latter treatment favoured traits promoting cell growth at the expense of traits underlying group fitness – a finding that is supported by results from a mathematical model. Our results show that the transition to multicellularity benefits from ecological conditions that maintain discreteness not just of the group (soma) phase, but also of the dispersal (germline) phase.