Herbivore populations may become adapted to the defenses of their local hosts, but the traits that maximize host exploitation may also carry ecological costs. We investigated the patterns and costs of local adaptation in the pine processionary moth, Thaumetopoea pityocampa, to its host plants, Pinus nigra and P. sylvestris. The two hosts differ in needle toughness, a major feeding impediment for leaf-eating insects. We observed a west-to-east gradient of increasing progeny size in the Italian Alps, matching the pattern in toughness of their respective local host plant. Eastern populations that feed on the native P. nigra with tough needles had larger eggs, and neonate larvae with larger head capsules, than western populations that feed on the native P. sylvestris and the introduced P. nigra with softer foliage. In a reciprocal transfer experiment that involved the eastern-most and the western-most populations of T. pityocampa from this region, and excluded natural enemies, we found evidence for local adaptation to the host plant. Specifically, larvae from the western population only performed well when raised on their local hosts with soft needles, and they suffered near-complete mortality on the tough foliage at the eastern site. In contrast, larvae from the eastern population survived equally well at both sites. Local adaptation involved a trade-off between progeny size and the number of offspring. We hypothesized that an additional cost, imposed by natural enemies, may be associated with increased egg size: we also observed a west-to-east gradient of increased egg parasitism. We tested this hypothesis in a common garden by exposing eggs of both populations to parasitism by two native egg parasitoids, Ooencyrtus pityocampae and Baryscapus servadeii. The eastern population suffered a higher level of parasitoid attack by O. pityocampae than the western population, and performance of hatched adults of both parasitoids was enhanced in large eggs. Thus, increased neonate quality (larger eggs yielding larger larvae) confers an advantage on tough foliage but incurs the ecological cost of increased parasitism, which may constrain further adaptation by this herbivore.