How honest signals evolve is a question that has been hotly debated by animal communication theoreticians and for which empirical evidence has been difficult to obtain. Theory predicts that, due to strong conflicts of interest, communication in aggressive contexts should be under strong selection for clear and reliable signaling. On the other hand, context-dependent signaling increases cheating opportunities, depending on how senders and receivers use, acquire and process signal information. Using animal signaling theory, theoretical visual models and behavioral experimentation, we characterize and determine proximate honesty mechanisms of the facial coloration in the Princess of Burundi cichlid, Neolamprologus brichardi, a species with complex social interactions. We show that this facial color pattern evolved stable chromatic conspicuousness for efficient transmission in the aquatic environment, while context-dependent plasticity in luminance of the horizontal black stripe element is used to signal switches in aggressive intent. Importantly, using experimental signal manipulation we demonstrate that social selection by receiver retaliation is the mechanism responsible for maintaining signal honesty. We suggest that by affecting the evolution of pigmentation patterns in sexually monochromatic cichlid species, social selection can have potential impacts on diversification dynamics.