Increasing sediment inputs into many coastal marine environments are having a profound influence on shallow marine habitats and their constituent species. Coral reef habitats appear to be particularly sensitive, with increased sediment deposition and turbidity regimes associated with declines in the abundance and diversity of coral reef fishes due to an indirect effect of habitat loss. The direct causes of these declines are largely unknown. In this study we tested the hypothesis that suspended sediment can negatively affect the foraging efficiency, nutritional state and survival of the planktivorous coral reef damselfish, Acanthochromis polyacanthus. Food acquisition, growth rate and body condition were measured in juvenile A. polyacanthus subjected to four experimental concentrations of suspended sediment (up to 180 mg l− 1; 30 NTU). There was a clear effect of suspended sediment on food acquisition. Fish took longer to find food and consumed less of the food provided with increasing sediment. The decline in food acquisition was associated with a significant reduction in juvenile growth and body condition. Fish reared in the medium and high sediment treatments increased in size by less than half the growth rates observed in the control group. Fish held in the control and low sediment treatment had double the surface area of hepatocyte vacuoles in the liver (a proxy for lipid storage) than the fish held in the medium and high sediment treatments. Suspended sediment also caused a significant increase in mortality of the juvenile fish in the high sediment treatment. Mortality reached almost 50% in the high sediment treatment, with no mortality in the control and less than 10% in the intermediate treatments. This study underscores the need to ameliorate increasing suspended sediment in inshore waters due to its potential impact on the growth and survival of planktivorous organisms, which form a vital trophic link between secondary production and fish biomass.