The worldwide decline of coral reefs calls for an urgent reassessment of current management practices. Confronting large-scale crises requires a major scaling-up of management efforts based on an improved understanding of the ecological processes that underlie reef resilience. Managing for improved resilience, incorporating the role of human activity in shaping ecosystems, provides a basis for coping with uncertainty, future changes and ecological surprises. Here we review the ecological roles of critical functional groups (for both corals and reef fishes) that are fundamental to understanding resilience and avoiding phase shifts from coral dominance to less desirable, degraded ecosystems. We identify striking biogeographic differences in the species richness and composition of functional groups, which highlight the vulnerability of Caribbean reef ecosystems. These findings have profound implications for restoration of degraded reefs, management of fisheries, and the focus on marine protected areas and biodiversity hotspots as priorities for conservation.