The rapid adoption of genetically engineered (GE) plants that express insecticidal Cry proteins derived from Bacillus thuringiensis (Bt) has raised concerns about their potential impact on non-target organisms. This includes the possibility that non-target herbivores develop into pests. Although studies have now reported increased populations of non-target herbivores in Bt cotton, the underlying mechanisms are not fully understood. We propose that lack of herbivore-induced secondary metabolites in Bt cotton represents a mechanism that benefits non-target herbivores. We show that, because of effective suppression of Bt-sensitive lepidopteran herbivores, Bt cotton contains reduced levels of induced terpenoids. We also show that changes in the overall level of these defensive secondary metabolites are associated with improved performance of a Bt-insensitive herbivore, the cotton aphid, under glasshouse conditions. These effects, however, were not as clearly evident under field conditions as aphid populations were not correlated with the amount of terpenoids measured in the plants. Nevertheless, increased aphid numbers were visible in Bt cotton compared with non-Bt cotton on some sampling dates. Identification of this mechanism increases our understanding of how insect-resistant crops impact herbivore communities and helps underpin the sustainable use of GE varieties.