One of the major goals of coral reef conservation is to determine the most effective means of managing marine resources in regions where economic conditions often limit the options available. For example, no-take fishing areas can be impractical in regions where people rely heavily on reef fish for food. In this study we test whether coral reef health differed among areas with varying management practices and socio-economic conditions on Pulau Weh in the Indonesian province of Aceh. Our results show that gear restrictions, in particular prohibiting the use of nets, were successful in minimizing habitat degradation and maintaining fish biomass despite ongoing access to the fishery. Reef fish biomass and hard-coral cover were two- to eight-fold higher at sites where fishing nets were prohibited. The guiding principle of the local customary management system, Panglima Laot, is to reduce conflict among community members over access to marine resources. Consequently, conservation benefits in Aceh have arisen from a customary system that lacks a specific environmental ethic or the means for strong resource-based management. Panglima Laot includes many of the features of successful institutions, such as clearly defined membership rights and the opportunity for resource users to be involved in making, enforcing and changing the rules. Such mechanisms to reduce conflict are the key to the success of marine resource management, particularly in settings that lack resources for enforcement.