Urbanization is increasing throughout the world, transforming natural habitats. Coyotes (Canis latrans) are found in highly urban, suburban, rural and undeveloped mountainous habitats, making them an exemplary model organism to investigate the effects of urbanization on animals. We hypothesized that coyotes in natural habitats are more genetically related to distant coyotes in similar natural habitats and less related to coyotes in urban areas due to natal habitat-biased dispersal. We also hypothesized that increasing urbanization would result in decreased genetic diversity due to habitat fragmentation, dispersal barriers and genetic drift. We analyzed 10 microsatellite genetic markers from 125 individual coyotes sampled across a spectrum of highly urban to highly natural areas in southern California. Most coyotes clustered into four distinct genetic populations, whereas others appeared to have admixed ancestry. Three genetic populations were associated primarily with urban habitats in Los Angeles and Orange Counties. In contrast, the remaining population was associated with more naturally vegetated land near the surrounding mountains. Coyotes living in natural areas formed a genetically distinct cluster despite long geographic distances separating them. Genetic diversity was negatively associated with urban/suburban land cover and local road density, and positively associated with the relative amount of natural vegetation. These results indicate that genetic differentiation and loss of genetic diversity coincided with the extremely rapid expansion of Greater Los Angeles throughout the 1900s. Thus, urbanization reduces gene flow and erodes genetic diversity even in a habitat generalist thought to be minimally impacted by land development.