The recognition that both local and regional processes act together in shaping local communities makes determining their relative roles in natural communities central to understanding patterns in community structure. 2. We investigated the relative influence of these processes on the phytoplankton communities of a highly interconnected pond system. We sampled the phytoplankton communities of 28 ponds concurrently with 20 local environmental variables. 3. We found that phytoplankton community variation, in terms of both phytoplankton community composition (PCC) and diversity, was only significantly explained by local environmental variables. These were mainly associated with the contrasting clear-water and turbid ecological states of the shallow ponds studied. Clear-water conditions favoured only a few taxa, resulting in a significantly lower taxon diversity and richness under these conditions. 4. The failure to explain variation in PCC by a dispersal model based on the water flow between ponds points at very effective species sorting. This is attributed to the high population turn-over rates and sensitivity to environmental conditions of phytoplankton communities. Some evidence was found, however, that dispersal influences local communities through mass effects between neighbouring ponds. 5. Overall, our results emphasize both the strong selection pressure that components of the food web exert on phytoplankton communities and the high potential of these communities to respond to such environmental change, thereby effectively opposing the homogenizing effects of continuous dispersal.