Here we investigate the evolutionary scenarios that led to the appearance of fluorescent color diversity in reef-building corals. We show that the mutations that have been responsible for the generation of new cyan and red phenotypes from the ancestral green were fixed with the help of positive natural selection. This fact strongly suggests that the color diversity is a product of adaptive evolution. An unexpected finding was a set of residues arranged as an intermolecular binding interface, which was also identified as a target of positive selection but is nevertheless not related to color diversification. We hypothesize that multicolored fluorescent proteins evolved as part of a mechanism regulating the relationships between the coral and its algal endosymbionts (zooxanthellae). We envision that the effect of the proteins' fluorescence on algal physiology may be achieved not only through photosynthesis modulation, but also through regulatory photosensors analogous to phytochromes and cryptochromes of higher plants. Such a regulation would require relatively subtle, but spectrally precise, modifications of the light field. Evolution of such a mechanism would explain both the adaptive diversification of colors and the coevolutionary chase at the putative algae-protein binding interface in coral fluorescent proteins. © Springer Science+Business Media, Inc. 2006.