Human impacts to biodiversity are pervasive and have led to widespread changes in the abundance, variety and functional traits of plant and animal assemblages. These impacts alter the roles of species in ecosystems, erode ecological resilience and productivity, and undermine the delivery of ecosystem services. Their ecological consequences are, however, often poorly understood in coastal oceans because of historical overfishing, eutrophication and urbanisation, and the absence of empirical data to describe changes in most food-webs. Here, we show a precipitous decline in functional diversity of coastal fish assemblages due to human disturbance across multiple coastal ecosystems throughout eastern Australia. This food-web simplification follows reductions in the abundance and diversity of iconic, endangered, and functionally significant coastal fishes, and the loss of variety, complementarity, and redundancy in functional trait space. These changes resulted in significant declines of all aspects of functional diversity. Our results demonstrate how human disturbance in coastal ecosystems can have fundamental consequences for ecosystem functioning, and highlight the focus management must take in conserving these ecosystems to avoid negative functional consequences.