Loss of biodiversity and nutrient enrichment are two of the main human impacts on ecosystems globally, yet we understand very little about the interactive effects of multiple stressors on natural communities and how this relates to biodiversity and ecosystem functioning. Advancing our understanding requires the following: (1) incorporation of processes occurring within and among trophic levels in natural ecosystems and (2) tests of context-dependency of species loss effects. We examined the effects of loss of a key predator and two groups of its prey on algal assemblages at both ambient and enriched nutrient conditions in a marine benthic system and tested for interactions between the loss of functional diversity and nutrient enrichment on ecosystem functioning. We found that enrichment interacted with food web structure to alter the effects of species loss in natural communities. At ambient conditions, the loss of primary consumers led to an increase in biomass of algae, whereas predator loss caused a reduction in algal biomass (i.e. a trophic cascade). However, contrary to expectations, we found that nutrient enrichment negated the cascading effect of predators on algae. Moreover, algal assemblage structure varied in distinct ways in response to mussel loss, grazer loss, predator loss and with nutrient enrichment, with compensatory shifts in algal abundance driven by variation in responses of different algal species to different environmental conditions and the presence of different consumers. We identified and characterized several context-dependent mechanisms driving direct and indirect effects of consumers. Our findings highlight the need to consider environmental context when examining potential species redundancies in particular with regard to changing environmental conditions. Furthermore, non-trophic interactions based on empirical evidence must be incorporated into food web-based ecological models to improve understanding of community responses to global change.