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On many tropical reefs, submarine groundwater discharge (SGD) provides a substantial and often overlooked nutrient source to nearshore ecosystems, yet little is known about the impacts of SGD on the biology of reef organisms. To address this, the physiological responses of the endemic rhodophyte <i>Gracilaria coronopifolia</i> and an invasive congener, <i>Gracilaria salicornia</i>, were examined across an SGD gradient in the field and laboratory. Tissue samples of both species were cultured for 16 days along an onshore-offshore SGD gradient at Wailupe, Oahu. <i>G. salicornia</i> tolerated the extremely variable salinity, temperature, and nutrient levels associated with SGD. In marked contrast, half of <i>G. coronopifolia</i> plants suffered tissue loss and even death at SGD-rich locations in the field and in laboratory treatments simulating high SGD flux. Measurements of growth, photosynthesis, and branch development via two novel metrics indicated that the 27&#8240; simulated-SGD treatment provided optimal conditions for the apparently less tolerant <i>G. coronopifolia</i> in the laboratory. Benthic community analyses revealed that <i>G. salicornia</i> dominated the nearshore reef exposed to SGD compared with the offshore reef, which had a greater diversity of native algae. Ultimately, SGD inputs to coastal environments likely influence benthic community structure and zonation on otherwise oligotrophic reefs.