Diverse coastal seaweed communities dominated by perennial fucoids become replaced by species-poor turfs of annual algae throughout the Baltic Sea. A large-scale field survey and factorial field experiments indicated that grazers maintain the fucoid community through selective consumption of annual algae. Interactive effects between grazers and dormant propagules of annual algae, stored in a'marine seed bank', determine the response of this system to anthropogenic nutrient loading. Nutrients override grazer control and accelerate the loss of algal diversity in the presence but not in the absence of a propagule bank. This implies a novel role of propagule banks for community regulation and ecosystem response to marine eutrophication.