Changes in one prey species' density can indirectly affect the abundance of another prey species if a shared predator eats both species leading to positive or negative indirect effects. In some cases, indirect effects may occur when prey move into a habitat, such as when riparian predator populations grow in response to adult aquatic insects and increase predation on terrestrial prey. However, predators could instead switch to aquatic insects or become satiated, reducing predation on terrestrial prey. To determine the net indirect effect of aquatic insects on terrestrial arthropods via generalist spider predators, we conducted a field experiment using enclosures on the shoreline of an Icelandic lake with numerous aquatic midges. Midge abundance and wolf spider density were altered to mimic midge influx and a wolf spider numerical response. At all predator densities, the presence of midges decreased rates of predation on terrestrial prey. When midges were absent, predation was 30percent greater at high spider density. But when midges were present, predation of sentinel prey was equal across spider densities, negating the influence of increased predator density. In lab mesocosms, prey survivorship increased greater or equal 50percent where midges were present and rapidly saturated; the addition of 5, 20, 50 and 100 midges equivalently reduced spider predation, supporting predator distraction rather than satiation as the root cause. Our results demonstrate a strong positive indirect effect of midges, and broadly support the concept that predator responses to alternative prey are a major influence on the magnitude and direction of predator-mediated indirect effects.