Many recognised species of coral reef fishes exhibit two or more colour variants, but it is unknown whether these represent genetically identical phenotypes, genetic polymorphisms or closely related species. We tested between these alternatives for two colour morphs of the coral reef fish, Pseudochromis fuscus, from Lizard Island (Great Barrier Reef). A molecular analysis using mtDNA did not detect any genetic differentiation between co-occurring ‘yellow’ and ‘brown’ colour morphs. A previous study proposed that these two colour morphs are aggressive mimics of yellow and brown damselfishes. Here, a manipulative field experiment was used to evaluate whether the colour dimorphism in P. fuscus is a phenotypic response to the presence of two different model species. Colonies of either yellow or brown damselfish species were established on different patch reefs, and each of the two different P. fuscus morphs was then placed on the different reefs. Contrary to expectations, all yellow individuals that stayed on the reefs changed to brown, regardless of the model species. No brown individuals changed to the yellow colouration. However, P. fuscus were more likely to emigrate from, or suffer higher mortality on, patch reefs where they were not matched with similarly coloured models. Clearly, yellow and brown P. fuscus are members of a single species with sufficient phenotypic plasticity to switch from yellow to brown colouration.