Due to their limited ranges and inherent isolation, island species have long been recognized as crucial systems for tackling a range of evolutionary questions, including in the early study of speciation.^1,2 Such species have been less studied in the understanding of the evolutionary forces driving DNA sequence evolution. Island species usually have lower census population sizes (N) than continental species and, supposedly, lower effective population sizes (Ne). Given that both the rates of change caused by genetic drift and by selection are dependent upon Ne, island species are theoretically expected to exhibit (1) lower genetic diversity, (2) less effective natural selection against slightly deleterious mutations,^3,4 and (3) a lower rate of adaptive evolution.^5–8 Here, we have used a large set of newly sequenced and published whole-genome sequences of Passerida species (14 insular and 11 continental) to test these predictions. We confirm that island species exhibit lower census size and Ne, supporting the hypothesis that the smaller area available on islands constrains the upper bound of Ne. In the insular species, we find lower nucleotide diversity in coding regions, higher ratios of non-synonymous to synonymous polymorphisms, and lower adaptive substitution rates. Our results provide robust evidence that the lower Ne experienced by island species has affected both the ability of natural selection to efficiently remove weakly deleterious mutations and also the adaptive potential of island species, therefore providing considerable empirical support for the nearly neutral theory. We discuss the implications for both evolutionary and conservation biology.