Intertidal sessile invertebrates experience tough competition for space which they avoid by releasing secondary metabolites (allelochemicals). We investigated the allelopathic interaction between sponge Cinachyrella cf. cavernosa and its neighbour zoanthids Zoanthus sansibaricus over a year on the rocky beach of Anjuna, (Goa) India. A major sterol (beta-sitosterol) was isolated from the sponge, and its natural variability was checked in tagged sponges with and without their competitor zoanthids during the reproductive and non-reproductive months of the sponges. The sponge showed significant variability in the production of beta-sitosterol owing to its spatial competition and asexual reproduction (budding) as predicted by the multiple regression analysis. Zoanthids are known to have dynamic mutualistic association with their autotrophic endosymbionts' dinoflagellate (Symbiodinium, known as zooxanthellae), which are directly involved in their physiology. The phytagel (TM)-based field assay of sponge's bioactive compound (beta-sitosterol) was conducted to check its allelopathic impact on Z. sansibaricus and its symbiotic zooxanthellae (Symbiodinium sp.). Results showed significant bleaching (50-80%) in the host Z. sansibaricus, resulting from a decrease in symbiotic zooxanthellae count, cell density, chl a and chl c content. This suggests the role of beta-sitosterol as allelochemical of the sponge in preventing the overgrowth of aggressive Z. sansibaricus, possibly by affecting its symbionts. This investigation is not only important to understand the ecological roles of marine-derived allelochemicals but also to allow sustainable bioprospecting of marine resources.