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Within-host competition between parasites, a consequence of infection by multiple strains, is predicted to favour rapid host exploitation and greater damage to hosts (virulence). However, the inclusion of biological variables can drastically change this relationship. For example, if competing parasite strains produce toxins that kill each other (interference competition), their growth rates and virulence may be reduced relative to single-strain infections. Bacteriocins are antimicrobial toxins produced by bacteria that target closely related strains and species, and to which the producing strain is immune. We investigated competition between bacteriocin-producing, insect-killing bacteria (Photorhabdus and Xenorhabdus) and how this competition affected virulence in caterpillars. Where one strain could kill the other, and not vice versa, the non-killing strain was competitively excluded, and insect mortality was the same as that of the killing strain alone. However, when caterpillars were multiply infected by strains that could kill each other, we did not observe competitive exclusion and their virulence was less than single-strain infections. The ubiquity and diversity of bacteriocins among pathogenic bacteria suggest mixed infections will be, on average, less virulent than single infections.