ABSTRACT: The coral-reef damselfish Dascyllus marginatus forms social groups of up to 25 individuals per coral. The fish forage for drifting zooplankton while remaining close to their home coral, used as a shelter from predators. Therefore, enhanced crowding and, in turn, stronger competition for food is expected in larger groups. The number of fish per coral at our study site (Eilat, Red Sea) was significantly lower than that expected under random distribution, indicating the fish’s preference to form small groups (≤3 ind.). The stomachs of fish in such groups contained, on average, twice as much food as those living in large groups (≥10 ind.). These findings indicate that the cost of intra-group competition is substantial, possibly affecting group size in this species.