Abstract
Habitat degradation not only disrupts habitat‐forming species, but alters the sensory landscape within which most species must balance behavioural activities against predation risk. Rapidly developing a cautious behavioural phenotype, a condition known as neophobia, is advantageous when entering a novel risky habitat. Many aquatic organisms rely on damage‐released conspecific cues (i.e. alarm cues) as an indicator of impending danger and use them to assess general risk and develop neophobia. This study tested whether settlement‐stage damselfish associated with degraded coral reef habitats were able to use alarm cues as an indicator of risk and, in turn, develop a neophobic response at the end of their larval phase. Our results indicate that fish in live coral habitats that were exposed to alarm cues developed neophobia, and, in situ , were found to be more cautious, more closely associated with their coral shelters and survived four‐times better than non‐neophobic control fish. In contrast, fish that settled onto degraded coral habitats did not exhibit neophobia and consequently suffered much greater mortality on the reef, regardless of their history of exposure to alarm cues. Our results show that habitat degradation alters the efficacy of alarm cues with phenotypic and survival consequences for newly settled recruits.