Ascertaining which niche processes allow coexistence between closely related species is of special interest in ecology. We quantified variations in the environmental niches and densities of two congeneric species, the pin-tailed and the black-bellied sandgrouse (Pterocles alchata and Pterocles orientalis) in allopatry and sympatry under similar abiotic, habitat and dispersal contexts to understand their coexistence. Using principal component analysis, we defined environmental gradients (niche dimensions) including abiotic, habitat and anthropogenic variables, and calculated niche breadth, position and overlap of both species in sympatry and allopatry. Additionally, sandgrouse density was modelled as a function of the niche dimensions and the density of the other species. We found evidence that each species occupies distinct environmental niches in sympatry and in allopatry. The black-bellied sandgrouse exploits a broader range of environmental conditions (wider niche breadth) while the pin-tailed sandgrouse reaches high densities where conditions seem to match its optimum. In sympatry, both species shift their niches to intermediate positions, indicating the importance of abiotic factors in setting coexistence areas. Environmental conditions determine regional densities of pin-tailed sandgrouse whereas biotic interactions explain the density of the black-bellied sandgrouse in areas with abiotic conditions similarly conducive for both species. Highly suitable areas for the pin-tailed sandgrouse fall beyond the upper thermal limit of the black-bellied sandgrouse, leading to niche segregation and low densities for the latter. Finally, local niche shift and expansion plus possible heterospecific aggregation allow the pin-tailed sandgrouse to thrive in a priori less favourable environments. This work provides insight into how different mechanisms allow species coexistence and how species densities vary in sympatry compared to allopatry as a result of environmental filtering and biotic interactions.