Mutualistic symbioses are ubiquitous in nature and facilitate high biodiversity and productivity of ecosystems by enhancing the efficiency of energy and nutrient use within ecological communities. For example, small groups of fish that inhabit coral colonies in reef ecosystems potentially enhance coral growth through defense from coral predators, aeration of coral tissue and nutrient provisioning. This study examines whether the prevalence and consequences of fish-coral interactions vary among sites with different environmental conditions in a coral reef lagoon, using the humbug damselfish Dascyllus aruanus and its preferred coral host Pocillopora damicornis as a study system. Using a field experiment, we tested the site-specific effects of D. aruanus on coral growth, and show that the cost-benefit ratio for corals hosting fish varies with local environmental variation. Results of this study also demonstrate that fish prefer to inhabit coral colonies with particular branch-spacing characteristics, and that the local abundance of D. aruanus influences the proportion of coral colonies within a site that are occupied by fish rather than increasing the number of fish per colony. We also show that corals consistently benefit from hosting D. aruanus via defense from predation by corallivorous butterflyfish, regardless of local environmental conditions. These findings highlight the need to consider the potential for multiple scale- and state-dependent interaction effects when examining the ecology of fish-coral associations. We suggest that fluctuating cost-benefit ratios for species interactions may contribute to the maintenance of different colony phenotypes within coral populations.