Subtidal reef surveys within the Lord Howe Island Marine Park revealed that populations of the sea urchin Tripneustes gratilla underwent an explosive outbreak in some regions of the park over a 2-year period. This urchin was rare or absent during 2006 surveys at 33 sites studied, but at sites off northern Lord Howe Island in 2008, densities averaged >1.3 m−2. Dramatic increases in T. gratilla density (exceeding 4 m−2) were observed at some sites. We quantify community-level impacts of T. gratilla using ‘before-after’ and ‘control-impact’ data. Zones closed to fishing exhibited similar increases in T. gratilla density to zones open to fishing. Although not previously reported as a keystone species affecting coral habitat, T. gratilla was found to possess an ‘ecosystem engineer’ function. Outbreak sites were characterised by significant declines in cover of foliose algae, including red algae, which decreased from 11.2% in 2006 compared to 2.5% in 2008. Brown foliose algae also declined at sites where T. gratilla outbreaks occurred, averaging 20.4% in 2006 compared to 1.8% in 2008. By contrast, crustose coralline algal cover increased at sites where high T. gratilla densities were observed, from 2.7% in 2006 to an average of 42.6% in 2008. We found no clear indication of impacts on sessile invertebrates or flow-on effects to other levels of the food web, with no significant change in coral cover or densities of mobile invertebrates or fish populations associated with the T. gratilla outbreak.