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Several recent studies detected fine-scale genetic structure in human populations. Hence, groups conventionally treated as single populations harbour significant variation in terms of allele frequencies and patterns of haplotype sharing. It has been shown that these findings should be considered when performing studies of genetic associations and natural selection, especially when dealing with polygenic phenotypes. However, there is little understanding of the practical effects of such genetic structure on demography reconstructions and selection scans when focusing on recent population history. Here we tested the impact of population structure on such inferences using high-coverage (~30×) genome sequences of 2305 Estonians. We show that different regions of Estonia differ in both effective population size dynamics and signatures of natural selection. By analyzing identity-by-descent segments we also reveal that some Estonian regions exhibit evidence of a bottleneck 10-15 generations ago reflecting sequential episodes of wars, plague and famine, although this signal is virtually undetected when treating Estonia as a single population. Besides that, we provide a framework for relating effective population size estimated from genetic data to actual census size and validate it on the Estonian population. This approach may be widely used both to cross-check estimates based on historical sources as well as to get insight into times and/or regions with no other information available. Our results suggest that the history of human populations within the last few millennia can be highly region specific and cannot be properly studied without taking local genetic structure into account.