For plants, the tradeoff between resource investment in defense and increased growth to out-compete neighbors creates an allocation dilemma. How plants resolve this dilemma, at the mechanistic level, is unclear. We found that Arabidopsis plants produced an attenuated defense phenotype under conditions of crowding and when exposed to far-red (FR) radiation, a light signal that plants use to detect the proximity of neighbors via the photoreceptor phytochrome. This phenotype was detectable through standard bioassays that measured the growth of Spodoptera frugiperda caterpillars. Two possible explanations for the effect of FR are: (i) a simple by-product of the diversion of resources to competition, and (ii) a specific effect of phytochrome on defense signaling. The first possibility was ruled out by the fact that the auxin-deficient sav3 mutant, which fails to induce growth responses to FR, still responded to FR with an attenuated defense phenotype. In support of the second hypothesis, we found that phytochrome inactivation by FR caused a strong reduction of plant sensitivity to jasmonates, which are key regulators of plant immunity. The effects of FR on jasmonate sensitivity were restricted to certain elements of the pathway. Supporting the idea that the FR effects on jasmonate signaling are functionally significant, we found that FR failed to increase tissue quality in jar1, a mutant impaired in jasmonate response. We conclude that the plant modulates its investment in defense as a function of the perceived risk of competition, and that this modulation is effected by phytochrome via selective desensitization to jasmonates.