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Abstract Genetic variation is the raw material upon which selection acts. The majority of environmental conditions change over time and therefore may result in variable selective effects. How temporally fluctuating environments impact the distribution of fitness effects and in turn population diversity is an unresolved question in evolutionary biology. Here, we employed continuous culturing using chemostats to establish environments that switch periodically between different nutrient limitations and compared the dynamics of selection to static conditions. We used the pooled Saccharomyces cerevisiae haploid gene deletion collection as a synthetic model for populations comprising thousands of unique genotypes. Using barcode sequencing, we find that static environments are uniquely characterized by a small number of high-fitness genotypes that rapidly dominate the population leading to dramatic decreases in genetic diversity. By contrast, fluctuating environments are enriched in genotypes with neutral fitness effects and an absence of extreme fitness genotypes contributing to the maintenance of genetic diversity. We also identified a unique class of genotypes whose frequencies oscillate sinusoidally with a period matching the environmental fluctuation. Oscillatory behavior corresponds to large differences in short-term fitness that are not observed across long timescales pointing to the importance of balancing selection in maintaining genetic diversity in fluctuating environments. Our results are consistent with a high degree of environmental specificity in the distribution of fitness effects and the combined effects of reduced and balancing selection in maintaining genetic diversity in the presence of variable selection.