The incorporation of ecological processes into models of trait evolution is important for understanding past drivers of evolutionary change. Species interactions have long been thought to be key drivers of trait evolution. However, models for comparative data that account for interactions between species are lacking. One of the challenges is that such models are intractable and difficult to express analytically. Here we present phylogenetic models of trait evolution that includes interspecific competition amongst species. Competition is modelled as a tendency of sympatric species to evolve towards distinct niches, producing trait overdispersion and high phylogenetic signal. The model predicts elevated trait variance across species and a slowdown in evolutionary rate both across the clade and within each branch. The model also predicts a reduction in correlation between otherwise correlated traits. We used an Approximate Bayesian Computation (ABC) approach to estimate model parameters. We tested the power of the model to detect deviations from Brownian trait evolution using simulations, finding reasonable power to detect competition in sufficiently large (20+ species) trees. We applied the model to examine the evolution of bill morphology of Darwin’s finches, and found evidence that competition affects the evolution of bill length.