The factors that determine species' range limits are of central interest to biologists. One particularly interesting group comprises odonates (dragonflies and damselflies), which show large differences in secondary sexual traits and respond quickly to climatic factors, but often have minor interspecific niche differences, challenging models of niche-based species coexistence. We quantified the environmental niches at two geographic scales to understand the ecological causes of northern range limits and the coexistence of two congeneric damselflies (Calopteryx splendens and C. virgo). Using environmental niche modeling, we quantified niche divergence first across the whole geographic range in Fennoscandia, and second only in the sympatric part of this range. We found evidence for interspecific divergence along the environmental axes of temperature and precipitation across the northern range in Fennoscandia, suggesting that adaptation to colder and wetter climate might have allowed C. virgo to expand farther north than C. splendens. However, in the sympatric zone in southern Fennoscandia we found only negligible and nonsignificant niche differences. Minor niche differences in sympatry lead to frequent encounters and intense interspecific sexual interactions at the local scale of populations. Nevertheless, niche differences across Fennoscandia suggest that species differences in physiological tolerances limit range expansions northward, and that current and future climate could have large effects on the distributional ranges of these and ecologically similar insects.