Kelp forests are some of the most important ecosystems on our planet, yet anthropogenically-induced global changes are challenging their persistence. Unlike other ecosystems that depend on ecosystem-engineering species, kelp forests often depend on the population dynamics of a few ecosystem-engineering species. This extreme lack of functional redundancy makes kelp forests sensitive to population contractions with potentially severe consequences for biodiversity. In a large-scale, controlled, field experiment, we simulated both the fragmentation and thinning of kelp forests by manipulating the density of Australasia's most important and widespread ecosystem engineering, Ecklonia radiata, transplanted onto different-sized experimental reefs. We show that the assemblages of individual holdfast in our densest, largest kelp forests supported 1.32 times more taxa than holdfasts in our sparsest, smallest kelp forests. Sparser, smaller kelp forests supported fewer colonial, filter-feeding organisms. Moreover, although larger, more sparsely populated reefs may have the same number of kelp as smaller, more densely populated reefs, differences in the spatial arrangement of kelp on these reefs explained more of the variation in taxa prevalence than the number of kelp alone. Overall, our results highlight the widespread biodiversity decline and simplification of temperate kelp forest ecosystems due to population contractions in a dominant ecosystem engineering kelp.