Sponges constitute an abundant and functionally important component of coral reef systems. Given their demonstrated resistance to environmental stress, it might be expected that the role of sponges in reef systems under modern regimes of frequent and severe disturbance may become even more substantial. Disturbances have recently reshaped the community structure of many Caribbean coral reefs shifting them towards a state of persistent low coral cover and often a dominance of macroalgae. Using competition and growth rates recorded from Glover's Atoll in Belize, we parameterise a mathematical model used to simulate the three-way competition between sponges, macroalgae and coral. We use the model to determine the range of parameters in which each of the three species might be expected to dominate. Emergent properties arise from our simple model of this complex system, and these include a special case in which heightened competitive ability of macroalgae versus coral may counter-intuitively prove to be advantageous to the persistence of corals. Importantly, we show that even under scenarios whereby sponges fail to invade the system, inclusion of this third antagonist can qualitatively affect the likelihood of alternative stable states - generally in favour of macroalgal dominance. The interplay between multi-species competition and predation is complex, but our efforts highlight a key process that has, until now, remained unexplored: the extent to which sponges dissipate algal grazing pressure by providing generalist fish with an alternative food source. We highlight the necessity of identifying the extent by which this process takes place in tropical systems in order to improve projections of alternative stable states for Caribbean coral reefs. © 2011 Elsevier B.V.