Genetic diversity within and among populations and species is influenced by complex demographic and evolutionary processes. Despite extensive research, there is no consensus regarding how landscape structure, spatial distribution, gene flow, and population dynamics impact genetic composition of natural populations. Here, we used amplified fragment length polymorphisms (AFLPs) to investigate effects of population size, geographic isolation, immigration, and gene flow on genetic structure, divergence, and diversity in populations of Tetrix subulata pygmy grasshoppers (Orthoptera: Tetrigidae) from 20 sampling locations in southern Sweden. Analyses of 1564 AFLP markers revealed low to moderate levels of genetic diversity (PPL = 59.5–90.1; Hj = 0.23–0.32) within and significant divergence among sampling localities. This suggests that evolution of functional traits in response to divergent selection is possible and that gene flow is restricted. Genetic diversity increased with population size and with increasing proportion of long-winged phenotypes (a proxy of recent immigration) across populations on the island of Öland, but not on the mainland. Our data further suggested that the open water separating Öland from the mainland acts as a dispersal barrier that restricts migration and leads to genetic divergence among regions. Isolation by distance was evident for short interpopulation distances on the mainland, but gradually disappeared as populations separated by longer distances were included. Results illustrate that integrating ecological and molecular data is key to identifying drivers of population genetic structure in natural populations. Our findings also underscore the importance of landscape structure and spatial sampling scheme for conclusions regarding the role of gene flow and isolation by distance.