1.Many coastal lagoons in eastern Australia have changed as a result of recent human activities. However, it is often difficult to determine the extent of change and the ecological implications. A palaeoecological approach allows a quantitative assessment of how an aquatic ecosystem changes and responds to human impacts beyond what is possible with historical data or monitoring programmes.2.Orielton Lagoon (south-east Tasmania, Australia) is a Ramsar-listed coastal wetland of international importance for conservation. This study was undertaken at the site to determine whether recent anthropogenic hydrological modifications to the lagoon had influenced its ecology, particularly salinity, and compromised its Ramsar status.3.A diatom–salinity transfer function was constructed from a training data set of 96 diatom taxa from 34 sampling sites in 19 lagoons along the east coast of Tasmania.4.The salinity of Orielton Lagoon has changed in response to a causeway constructed across its mouth, which has transformed the lagoon from an open marine environment to an enclosed, virtually stagnant, brackish water body.5.These changes have compromised the protected coastal wetland status of Orielton Lagoon. Environmental remediation attempts have since partially restored the natural hydrology of the lagoon and it is now returning towards the state it was in prior to causeway construction.6.A palaeoecological approach using diatoms was found to be successful in reconstructing recent salinity changes and investigating human impacts on Orielton Lagoon over the last 50–55 years. Copyright © 2006 John Wiley & Sons, Ltd.