One of the primary challenges of evolutionary research is to identify ecological factors that favor reproductive isolation. Therefore, studying partially isolated taxa has the potential to provide novel insight into the mechanisms of evolutionary divergence. Our study utilizes an adaptive color polymorphism in the arc-eye hawkfish (Paracirrhites arcatus) to explore the evolution of reproductive barriers in the absence of geographic isolation. Dark and light morphs are ecologically partitioned into basaltic and coral microhabitats a few meters apart. To test whether ecological barriers have reduced gene flow among dark and light phenotypes, we evaluated genetic variation at 30 microsatellite loci and a nuclear exon (Mc1r) associated with melanistic coloration. We report low, but significant microsatellite differentiation among color morphs and stronger divergence in the coding region of Mc1r indicating signatures of selection. Critically, we observed greater genetic divergence between color morphs on the same reefs than between the same morphs in different geographic locations. We hypothesize that adaptation to the contrasting microhabitats is overriding gene flow and is responsible for the partial reproductive isolation observed between sympatric color morphs. Combined with complementary studies of hawkfish ecology and behavior, these genetic results indicate an ecological barrier to gene flow initiated by habitat selection and enhanced by assortative mating. Hence the arc-eye hawkfish fulfill theoretical expectations for the earliest phase of speciation-with-gene-flow.