Based on numerical experiments with a new physiologically structured population model we demonstrate that predator physiology under low food and under starving conditions can have substantial implications for population dynamics in predator–prey interactions. We focused on Daphnia-algae interactions as model system and developed a new dynamic energy budget (DEB) model for individual daphnids. This model integrates the κ-rule approach common to net assimilation models into a net-production model, but uses a fixed allocation of net-productive energy in juveniles. The new DEB-model agrees well with the results of life history experiments with Daphnia. Compared to a pure κ-rule model the new allocation scheme leads to significant earlier maturation at low food levels and thus is in better agreement with the data. Incorporation of the new DEB-model into a physiologically structured population model using a box-car elevator technique revealed that the dynamics of Daphnia-algae interactions are highly sensitive to the assumptions on the energy allocation of juveniles under low food conditions. Additionally we show that also other energy allocation rules of our DEB-model concerning decreasing food levels and starving conditions at the individual level have strong implications for Daphnia-algae interactions at the population level. With increasing carrying capacity of algae a stable equilibrium with coexistence of Daphnia occurs and algae shifts to limit cycles. The amplitudes of the limit cycles increase with increasing percentage of sustainable weight loss. If a κ-rule energy allocation is applied to juveniles, the stable equilibrium occurs for a much narrower range of algal carrying capacities, the algal concentration at equilibrium is about 2 times larger, and the range of algae carrying capacities at which daphnids become extinct extends to higher carrying capacities than in the new DEB-model. Because predator–prey dynamics are very sensitive to predator physiology under low food and starving conditions, empirical constraints of predator physiology under these conditions are essential when comparing model results with observations in laboratory experiments or in the field.