Interference competition is ubiquitous in nature. Yet its effects on resource exploitation remain largely unexplored for species that compete for dynamic resources. Here, I present a model of exploitative and interference competition with explicit resource dynamics. The model incorporates both biotic and abiotic resources. It considers interference competition both in the classical sense (i.e. each species suffers a net reduction in per capita growth rate via interference from, and interference on, the other species) and in the broad sense (i.e. each species suffers a net reduction in per capita growth rate via interference from, but can experience an increase in growth rate via interference on, the other species). Coexistence cannot occur under classical interference competition even when the species inferior at resource exploitation is superior at interference. Such a trade–off can, however, change the mechanism of competitive exclusion from dominance by the superior resource exploiter to a priority effect. Now the inferior resource exploiter can exclude the superior resource exploiter provided it has a higher initial abundance. By contrast, when interference is beneficial to the interacting species, coexistence is possible via a trade–off between exploitation and interference. These results hold regardless of whether the resource is biotic or abiotic, indicating that the outcome of exploitative and interference competition does not depend on the exact nature of resource dynamics. The model makes two key predictions. First, species that engage in costly interference mechanisms (e.g. territoriality, overgrowth or undercutting, allelopathy and other forms of chemical competition) should not be able to coexist unless they also engage in beneficial interference mechanisms (e.g. predation or parasitism). Second, exotic invasive species that displace native biota should be superior resource exploiters that have strong interference effects on native species with little or negative cost. The first prediction provides a potential explanation for patterns observed in several natural systems, including plants, aquatic invertebrates and insects. The second prediction is supported by data on invasive plants and vertebrates.