Natural stress gradients can reduce predation intensity and increase prey abundances. Whether the harsh conditions of anthropogenic habitat degradation can similarly reduce predation intensity and structure community dynamics remains largely unexplored. Oxygen depletion in coastal waters (hypoxia) is a form of degradation that has recently emerged as one of the greatest threats to coastal ecosystems worldwide due to increased rates of eutrophication and climate change. I conducted field experiments and surveys to test whether relaxed predation could explain the paradoxically high abundance of clams that have sustained a fishery in a degraded estuary with chronic hypoxic conditions. Hypoxia reduced predation on all experimental species but enhanced the long-term survivorship of only sufficiently hypoxia-tolerant prey due to periodic extreme conditions. As a consequence, only the harvested quahog clam (Mercenaria mercenaria) thrived in hypoxic areas that were otherwise rendered dead zones with depauperate diversity and low abundances of other species. This suggests that enhanced populations of some key species may be part of a predictable nonlinear community response that sustains ecosystem services and masks overall downward trends of habitat degradation.