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Big bluestem (Andropogon gerardii) is an ecologically dominant grass with wide distribution across the environmental gradient of U.S. Midwest grasslands. This system offers an ideal natural laboratory to study population divergence and adaptation in spatially varying climates. Objectives were to: (i) characterize neutral genetic diversity and structure within and among three regional ecotypes derived from 11 prairies across the U.S. Midwest environmental gradient, (ii) distinguish between the relative roles of isolation by distance (IBD) vs. isolation by environment (IBE) on ecotype divergence, (iii) identify outlier loci under selection and (iv) assess the association between outlier loci and climate. Using two primer sets, we genotyped 378 plants at 384 polymorphic AFLP loci across regional ecotypes from central and eastern Kansas and Illinois. Neighbour-joining tree and PCoA revealed strong genetic differentiation between Kansas and Illinois ecotypes, which was better explained by IBE than IBD. We found high genetic variability within prairies (80%) and even fragmented Illinois prairies, surprisingly, contained high within-prairie genetic diversity (92%). Using Bayenv2, 14 top-ranked outlier loci among ecotypes were associated with temperature and precipitation variables. Six of seven BayeScanFST outliers were in common with Bayenv2 outliers. High genetic diversity may enable big bluestem populations to better withstand changing climates; however, population divergence supports the use of local ecotypes in grassland restoration. Knowledge of genetic variation in this ecological dominant and other grassland species will be critical to understanding grassland response and restoration challenges in the face of a changing climate., (© 2014 John Wiley & Sons Ltd.)