Mass coral bleaching events coupled with local stressors have caused regional-scale loss of corals on reefs globally. Following the loss of corals, the structural complexity of these habitats is often reduced. By providing shelter, obscuring visual information, or physically impeding predators, habitat complexity can influence predation risk and the perception of risk by prey. Yet little is known on how habitat complexity and risk assessment interact to influence predator-prey interactions. To better understand how prey’s perception of threats may shift in degraded ecosystems, we reared juvenilePomacentrus chrysurusin environments of various habitat complexity levels and then exposed them to olfactory risk odours before simulating a predator strike. We found that the fast-start escape responses were enhanced when forewarned with olfactory cues of a predator and in environments of increasing complexity. However, no interaction between complexity and olfactory cues was observed in escape responses. To ascertain if the mechanisms used to modify these escape responses were facilitated through hormonal pathways, we conducted whole-body cortisol analysis. Cortisol concentrations interacted with habitat complexity and risk odours, such thatP.chrysurusexhibited elevated cortisol levels when forewarned with predator odours, but only when complexity levels were low. Our study suggests that as complexity is lost, prey may more appropriately assess predation risk, likely as a result of receiving additional visual information. Prey’s ability to modify their responses depending on the environmental context suggests that they may be able to partly alleviate the risk of increased predator-prey interactions as structural complexity is reduced.