What is the effect of a variable environment on phenotypic variation? Does the physiological response to a new environment increase or decrease the differences among individuals? We provide a speculative hypothesis suggesting that the induction of a physiological response to environmental change minimizes phenotypic differences among individuals in outbred genetically variable populations. Although this suggestion runs counter to the general idea that environmental variation induces phenotypic variation, we provide evidence that this is not always the case. One explanation for this counterintuitive hypothesis is that in a variable environment, the physiological mechanism that maintains homeostasis changes the concentrations of active transcription factors (TFs). This change in TFs reduces the effectiveness of nucleotide polymorphisms in TF binding sites and thus reduces the variation among individuals in mRNA expression and in the phenotypes affected by these mRNA transcripts. Thus, there are fewer differences among individuals in a variable environment compared with the variation observed in a constant environment. Our conjecture is that the physiological mechanisms that maintain homeostasis in response to environmental variation canalize phenotypic variation. If our hypothesis is correct, then the physiological canalization of gene expression in a variable environment hides genetic variation and thereby reduces the evolutionary costs of polymorphism. This hypothesis provides a new perspective on the mechanisms by which high levels of genetic variation can persist in real-world populations.