Transposable temperate phages randomly insert into bacterial genomes, providing increased supply and altered spectra of mutations available to selection, thus opening alternative evolutionary trajectories. Transposable phages accelerate bacterial adaptation to new environments, but their effect on adaptation to the social environment is unclear. Using experimental evolution of Pseudomonas aeruginosa in iron-limited and iron-rich environments, where the cost of producing cooperative iron-chelating siderophores is high and low, respectively, we show that transposable phages promote divergence into extreme siderophore production phenotypes. Iron-limited populations with transposable phages evolved siderophore overproducing clones alongside siderophore non-producing cheats. Low siderophore production was associated with parallel mutations in pvd genes, encoding pyoverdine biosynthesis, and pqs genes, encoding quinolone signalling, while high siderophore production was associated with parallel mutations in phenazine-associated gene clusters. Notably, some of these parallel mutations were caused by phage insertional inactivation. These data suggest that transposable phages, which are widespread in microbial communities, can mediate the evolutionary divergence of social strategies.