Although coral dwelling fishes are common on coral reefs, the nature of their effect on the host corals is poorly understood. The present study, conducted in the Gulf of Eilat (Red Sea) between July 1989 and August 1990, demonstrated that the branching coral Stylophora pistillata (Esper) benefits, in two components of coral fitness, from the presence of the damselfish Dascyllus marginatus (Rüppell), an obligate coral dweller. The growth rate of damselfish-inhabited corals was significantly higher than that of corals without damselfish. This was observed, using two growth assessment methods, in long-term (>7 mo) comparisons between: (1) corals where the damselfish were experimentally removed versus corals with unaltered fish groups; and (2) naturally inhabited versus non-inhabited corals. The presence of damselfish did not affect the coral's specific (per surface area) reproductive output, whether it was assessed by the number of female gonads per polyp or by the number of planulae released cm-2 surface area d-1. However, the more rapid increase in branch size in damselfish-inhabited corals resulted in an apparent increase in the total reproductive output, with age, in growing corals. These findings demonstrate that the association between the damselfish D. marginatus and its host coral, S. pistillata, is mutualistic.