Ecological and evolutionary dynamics can occur on similar timescales. However, theoretical predictions of how rapid evolution can affect ecological dynamics are inconclusive and often depend on untested model assumptions. Here we report that rapid prey evolution in response to oscillating predator density affects predator-prey (rotifer-algal) cycles in laboratory microcosms. Our experiments tested explicit predictions from a model for our system that allows prey evolution. We verified the predicted existence of an evolutionary tradeoff between algal competitive ability and defence against consumption, and examined its effects on cycle dynamics by manipulating the evolutionary potential of the prey population. Single-clone algal cultures (lacking genetic variability) produced short cycle periods and typical quarter-period phase lags between prey and predator densities, whereas multi-clonal (genetically variable) algal cultures produced long cycles with prey and predator densities nearly out of phase, exactly as predicted. These results confirm that prey evolution can substantially alter predator-prey dynamics, and therefore that attempts to understand population oscillations in nature cannot neglect potential effects from ongoing rapid evolution.