Although recent studies have revealed that the relationship between diversity and environmental heterogeneity is not always positive, as classical niche theory predicts, scientists have had difficulty interpreting these results from an ecological perspective. We propose a new concept-microfragmentation-to explain how small-scale heterogeneity can have neutral or even negative effect on species diversity. We define microfragmentation as a community level process of splitting habitat into a more heterogeneous environment that can have non-positive effects on the diversity through habitat loss and subsequent isolation. We provide support for the microfragmentation concept with results from spatially explicit heterogeneity-diversity model simulations, in which varying sets of species (with different ratios of specialist and generalist species) were modeled at different levels of configurational heterogeneity (meaning that only the habitat structure was changed, not its composition). Our results indicate that environmental heterogeneity can affect community diversity in the same way as fragmentation at the landscape level. Although generalist species might not be seriously affected by microfragmentation, the persistence of specialist species can be seriously disturbed by small-scale patchiness. The microfragmentation concept provides new insight into community level diversity dynamics and can influence conservation and management strategies.