General theory predicts that ecological specialization should be rare in marine ecosystems, given that barriers to dispersal are less effective in the vastness of the sea compared to terrestrial settings. This paradigm, however, hardly fits with classical theories of local adaptation, leaving the question open of as to how marine diversity could originate at a restricted spatial scale. We tackled this so-called “Marine Speciation Paradox” by investigating how local specialization could arise in a widely distributed marine species, the seaweed pipefish Syngnathus schlegeli. We integrated morphological, genomic, and niche-based evidences to unravel geographical structuring in S. schlegeli populations. We revealed the existence of a north-to-south phenotypic gradient in eye size among S. schlegeli populations. This morphological differentiation was paralleled by genetic divergence, with South China Sea populations emerging as relatively independent. The north-to-south phylogeographical structuring was further corroborated by ecological analyses. We observed high niche differentiation among northern, central, and southern populations, resulting from both niche expansion and niche shift processes. Projected habitat suitability onto the Last Glacial Maximum revealed the existence of historical barriers to dispersal between the South and East China seas. We showed that the effect of this historical segregation, in concert with niche-driven ecological differentiation, lead to establishment of three distinct clades across the widely distributed marine pipefish. Ultimately, our study demonstrates that even the sea environment maintains the potential for adaptive radiation and ecological specialization, suggesting that ‘marine speciation’ may actually be far from being ‘paradoxical’.