Coral abundance is declining on many coral reef ecosystems worldwide, which in some locations has resulted in regime shifts where coral has been replaced by other benthic organisms. Although transitions to sponge-dominated states have been reported from a number of locations across the world after coral declines, they are typically dominated by only one or few species. However, there is increasing evidence that high-diversity sponge-dominated reefs may persist in the future as reefs experience ocean warming and acidification, because sponges appear generally more resilient than corals. Here we quantify spatial variation in a highly unusual shallow-water (<5 m and deeper) coral reef system at Jaco Island in Timor-Leste (East Timor) that is dominated by diverse sponge assemblages and has little coral. We found a total of 33 sponge species (based on Operational Taxonomic Units) in a total sampling area of 15 m2. We found that sponges were the dominant biological group at this site and covered approximately 29% of the benthos, with live coral, algae, and dead substrate cover at 7%, 7%, and 54%, respectively. Multivariate analysis identified that sponge assemblages varied significantly over a small spatial scale (100 m). Our findings differ from those from the generally low-diversity sponge reefs that have been reported elsewhere as coral has declined and may be more typical of future sponge-dominated reefs. Therefore, future studies to understand how this reef functions may provide insights into how future high-diversity sponge reefs might function.