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Vertebrate life histories evolve in response to selection imposed by abiotic and biotic environmental conditions while being limited by genetic, developmental, physiological, demographic and phylogenetic processes that constrain adaptation. Despite the well-recognized shifts in selective pressures accompanying transitions among environments, the conditions driving innovation and the consequences for life-history evolution remain outstanding questions. Here we compare the traits of vertebrates that occupy aquatic or terrestrial environments as juveniles to infer shifts in evolutionary constraints that explain differences in their life-history traits and thus their fundamental demographic rates. Our results emphasize the reduced potential for life-history diversification on land, especially that of reproductive strategies, which limits the scope of viable life-history strategies. Moreover, our study reveals differences between the evolution of viviparity in aquatic and terrestrial realms. Transitions from egg laying to live birth represent a major shift across life-history space for aquatic organisms, whereas terrestrial egg-laying organisms evolve live birth without drastic changes in life-history strategy. Whilst trade-offs in the allocation of resources place fundamental constraints on the way life histories can vary, ecological setting influences the position of species within the viable phenotypic space available for adaptive evolution.