As a consequence of anthropogenic activities and climate change, accelerated terrestrial sediment runoff is causing the gradual mudification of soft sediment estuarine habitats worldwide. Increased sediment mud content (< 63 µm) has been recognised to alter seagrass morphology and cause declines in primary production in unvegetated habitats. However, the effect of increased mud content on primary production in seagrass meadows remains largely unknown. To address this, primary production in intertidal seagrass meadows (Zostera muelleri) and adjacent unvegetated habitats was measured in situ using benthic incubation chambers across an existing sedimentary gradient (nine sites spanning 5–33% mud content). An additional two unvegetated mudflat sites (39–49% mud content) were also sampled to expand the gradient. Seagrass net (NPP) and gross primary production (GPP) was greater than in the adjacent unvegetated habitat and did not vary with mud content, even after standardising GPP by photosynthesising biomass (i.e. photosynthetic efficiency). In contrast, in the adjacent unvegetated habitat, photosynthetic efficiency declined with increasing mud content. Inclusion of the additional mudflat sites negatively impacted NPP, GPP, and photosynthetic efficiency in the unvegetated habitat. Thus, while primary production in seagrass meadows may have some resilience to future increases in mud content (up to ~33%), further degradation and loss of seagrass habitats could result in the expansion of unvegetated habitats and ultimately lead to production losses, likely to be most acute in areas with high mud content (≥ 39%).