The present study was conducted to assess the toxicity of Foroozan (Iranian crude oil) on the ornate wrasse Thalassoma pavo (Labridae) using three sub-lethal crude oil concentrations. Gills, selected as target organ being the major route of hydrocarbon uptake, were excised after 48, 96 and 192 hours and analyzed by light and both scanning and transmission electron microscopy. Cellular biomarkers of exposure and/or effect were measured in branchial tissues of T. pavo, and severe lesions such as necrosis, aneurysms and disorganization of the lamellae proportional to the Foroozan exposure periods and concentrations were observed. The main alteration was on the lamellar epithelium, which displayed an irregular profile characterized by pavement cell cytoplasmic protrusion and an alteration of the oxygen chemosensing cells, resulting in impairment of various biological activities. Nevertheless, the ability of specimens to regulate calcium homeostasis and neurotransmission, as well as balance cell turnover, suggests that the species tested to not only survive but also recover in such high crude oil dosage regimen. The identification in gills of histological and neurological changes associated with acute crude oil exposure confirms the utility of the sub-lethal toxicity tests.