The euphotic–mesophotic transition is characterized by dramatic changes in environmental conditions, which can significantly alter the functioning of ecosystem engineers and the structure of their associated communities. However, the drivers of biodiversity change across the euphotic–mesophotic transition remain unclear. Here, we investigated the mechanisms affecting the biodiversity-supporting potential of free-living red coralline algae—globally important habitat creators—towards mesophotic depths. Across a 73 m depth gradient, we observed a general decline in macrofaunal biodiversity (fauna abundance, taxon richness and alpha diversity), but an increase in beta-diversity (i.e. variation between assemblages) at the deepest site (86 m depth, where light levels were less than 1% surface irradiance). We identified a gradient in abundance decline rather than distinct ecological shifts, driven by a complex interaction between declining light availability, declining size of the coralline algal host individuals and a changing host taxonomy. However, despite abundance declines, high between-assemblage variability at deeper depths allowed biodiversity-supporting potential to be maintained, highlighting their importance as coastal refugia.