We carried out a population genomic survey of Saccharomyces cerevisiae diploid isolates and find that many budding yeast strains have high levels of genomic heterozygosity, much of which is likely due to outcrossing. We demonstrate that variation in heterozygosity among strains is correlated with a life-history trade-off that involves how readily yeast switch from asexual to sexual reproduction under nutrient stress. This trade-off is reflected in a negative relationship between sporulation efficiency and pseudohyphal development and correlates with variation in the expression of RME1, a transcription factor with pleiotropic effects on meiosis and filamentous growth. Selection for alternate life-history strategies in natural versus human-associated environments likely contributes to differential maintenance of genomic heterozygosity through its effect on the frequency that yeast lineages experience sexual cycles and hence the opportunity for inbreeding. In addition to elevated levels of heterozygosity, many strains exhibit large genomic regions of loss-of-heterozygosity (LOH), suggesting that mitotic recombination has a significant impact on genetic variation in this species. This study provides new insights into the roles that both outcrossing and mitotic recombination play in shaping the genome architecture of Saccharomyces cerevisiae. This study also provides a unique case where stark differences in the genomic distribution of genetic variation among individuals of the same species can be largely explained by a life-history trade-off.