Coastal marine habitats are vulnerable to disturbances (e.g., marine heatwave, cyclones) which may affect their capacity to support a diversity of reef fishes. High profile examples include the local extinction of fishes from coral reefs after key habitat components were lost following bleaching events. Observational studies of fish occupying tropical Sargassum meadows have indicated changes in macroalgal canopy structure are a key predictor of fish diversity. Here, we use a field experiment to tease apart the importance of canopy height for fish diversity by halving the height of macroalgal canopy in several Sargassum meadows within Ningaloo Marine Park. We then assessed short- (days), medium- (months) and long-term (years) responses of associated fish communities and their predators. Relative to reference sites, experimental meadows had significant reductions in fish species richness and abundance (~25% and ~80%, respectively) five-days post-disturbance. Although Sargassum canopy had recovered two years later, some species continued to be absent from experimental meadows. Our results demonstrate that macroalgal canopy height is a key driver of fish diversity in tropical settings, and that unseasonal disturbances that cause habitat degradation can have lasting effects upon fish biodiversity. Therefore, monitoring of canopy height should provide a key indicator of seaweed meadow health.