The structure and composition of bacterial communities can compromise antibiotic efficacy. For example, the secretion of β-lactamase by individual bacteria provides passive resistance for all residents within a polymicrobial environment. Here, we uncover that collective resistance can also develop via intracellular antibiotic deactivation. Real-time luminescence measurements and single-cell analysis demonstrate that the opportunistic human pathogen Streptococcus pneumoniae grows in medium supplemented with chloramphenicol (Cm) when resistant bacteria expressing Cm acetyltransferase (CAT) are present. We show that CAT processes Cm intracellularly but not extracellularly. In a mouse pneumonia model, more susceptible pneumococci survive Cm treatment when coinfected with a CAT-expressing strain. Mathematical modeling predicts that stable coexistence is only possible when antibiotic resistance comes at a fitness cost. Strikingly, CAT-expressing pneumococci in mouse lungs were outcompeted by susceptible cells even during Cm treatment. Our results highlight the importance of the microbial context during infectious disease as a potential complicating factor to antibiotic therapy.