The expression of sexually selected traits, such as ornaments or body coloration, is often influenced by environmental conditions. While such phenotypic plasticity is often thought to precede evolutionary change, plasticity itself can also be a target of selection. However, the selective forces supporting the evolution and persistence of plasticity in sexual traits are often unclear. Using the cichlid fish Astatotilapia burtoni , we show that variation in the level of mate competition may promote plasticity in body coloration. In this species, males can change between yellow and blue colour. We found that experimentally increased competition over mating territories led to a higher proportion of males expressing the yellow phenotype. The expression of yellow coloration was found to be beneficial because yellow males won more staged dyadic contests and exhibited a lower level of oxidative stress than blue males. However, females were more likely to spawn with blue males in mate choice experiments, suggesting that expression of blue coloration is sexually more attractive. The ability to adjust colour phenotype according to the local competitive environment could therefore promote the persistence of plasticity in coloration.