Tern Island's surrounding reef, the French Frigate Shoals, is part of the new Northwestern Hawaiian Islands Coral Reef Ecosystem Reserve. The reserve encompasses over 11,000 square kilometers of coral reef habitat, over 65% of all coral reefs in U.S. waters (National Oceanic and Atmospheric Administration (NOAA). Because of its remote location, the coral ecosystem has remained relatively pristine. Efforts are being made to protect the area further through the designation of National Marine Sanctuary.

The coral reef ecosystem hosts a distinctive array of marine mammals, fish, sea turtles, birds, and invertebrates, including species that are endemic, rare, threatened, and endangered. The Northwestern Hawaiian Islands support more than 250 species of fish, 50 species of coral, 60 species of invertebrates, and 200 species of marine algae. "Since these islands are too far north to be in the main path of hurricanes coming up from the south, and because there is a wide variety of substrate and habitat, French Frigate Shoals has the highest diversity of corals of any of the other NWHI & main Hawaiian Islands and atolls."—Holly Lohuis from Jean-Michel Cousteau's Ocean Futures Society. A recent Checklist of the near shore fishes of Tern Island is available online.

The reef ecosystem provides critical habitat for millions of seabirds, federally endangered monk seals, and threatened Hawaiian green sea turtles.