Coastal aquaculture supports local economies and reduces pressure on wild stocks but can have adverse impacts on the marine environment when poorly managed. Estuaries, where oyster aquaculture is common, are critical habitats for seagrasses that are declining globally. We used field experiments to test how trays, longline baskets and floating bags (the three most common oyster cultivation methods used in New South Wales, Australia) affect the endangered seagrass Posidonia australis over six months. Trays and longline baskets reduced light availability by 90.8% and 52.8%, respectively, compromised P. australis photosynthetic efficiency and caused 4-fold declines in shoot density after three months. Seagrass leaf growth did not vary among treatments but leaves under trays and baskets were shorter than in controls. Floating bags were not associated with any declines in seagrass density or leaf length. Sediment deposition was highest under trays, yet nutrient and organic matter content did not differ among treatments. There is a strong need to prevent damage to sensitive marine habitats like P. australis meadows, and floating bags for oyster aquaculture seem a promising method for minimising impacts to seagrass. More work is required to test for any longer-term effects on seagrasses and to understand any impacts of deploying floating bags in shallower water and at densities greater than used in this study.