Adaptive radiation as a result of ecological opportunity can have profound effects on the evolutionary outcome of species. On coral reefs, parrotfishes have been considered as one of the most dramatic examples of adaptive radiation unique in their extreme dietary specialisation. Using abrasion-resistant biomineralized teeth, parrotfishes are able to mechanically extract protein-rich micro-photoautotrophs growing in and amongst reef carbonate material. This unique ability to exploit a previously untapped trophic resource is thought to have led to the early diversification of the parrotfishes. In order to better understand the key evolutionary innovations leading to the success of these dietary specialists, we sequenced and analysed the genome of the spotted parrotfish (Cetoscarus ocellatus). Our findings reveal significant expansion, selection, and duplication within several gene families responsible for detoxification, including the cytochrome p450 gene family and non-cyp450 carboxylesterases. We find preliminary evidence that the structural mechanism responsible for the extreme hardness and biomineralization of parrotfish teeth may be a result of poly-glutamine expansion in the enamel protein ameloblastin. We also detect expansion and selection for several genes related to pigmentation and sequential hermaphroditism. Together, these results highlight a potentially complex interplay of adaptive radiation and sexual selection operating on coral reef ecosystems.