<p>Coral reef degradation changes substrate composition and complexity, which can potentially affect macrobenthic biodiversity. To evaluate the effects of these changes on reef diversity, we analyzed the substrate types and their complexity, along with the taxonomic and functional biodiversity of macrobenthos in the Xisha and Nansha Islands of the South China Sea. Five main substrate types—live coral, dead coral, crustose coralline algae (CCA), turf algae, and macroalgae—differed in structural complexity. Substrate structural complexity was positively linked to the coverage of live coral, macroalgae, and CCA but was lower in areas dominated by dead coral and turf algae. Taxonomic diversity of macrobenthos was highest in live coral and macroalgae habitats, whereas functional richness was primarily influenced by structural complexity. These findings underscore the critical importance of both substrate type and structural complexity in shaping reef biodiversity. They fill a regional gap in South China Sea biodiversity research and provide valuable insights for the effective management and conservation of coral reefs.</p>