ABSTRACT Tropical lagoon-inhabiting organisms live in highly irradiated ecosystems and are particularly susceptible to thermal stress resulting from climate change. However, despite living close to their thermal maxima, stress response mechanisms found in these organisms are poorly understood. We used a novel physiological–proteomic approach for sponges to describe the stress response mechanisms of the lagoon-inhabiting sponge Amphimedon navalis, when exposed to elevated seawater temperatures of +2°C and +4°C relative to a 26°C ambient temperature for 4 weeks. After 4 weeks of thermal exposure, the buoyant weight of the sponge experienced a significant decline, while its pumping rates and oxygen consumption rates significantly increased. Proteome dynamics revealed 50 differentially abundant proteins in sponges exposed to elevated temperature, suggesting that shifts in the sponge proteome were potential drivers of physiological dysfunction. Thermal stress promoted an increase in detoxification proteins, such as catalase, suggesting that an excess of reactive oxygen species in sponge cells was responsible for the significant increase in oxygen consumption. Elevated temperature also disrupted cellular growth and cell proliferation, promoting the loss of sponge biomass, and the high abundance of multiple α-tubulin chain proteins also indicated an increase in cytoskeletal activities within sponge cells, which may have induced the increase in sponge pumping rate. Our results show that sustained thermal exposure in susceptible lagoonal sponges may induce significant disruption of cellular homeostasis, leading to physiological dysfunction, and that a combined physiological–proteomic approach may provide new insights into physiological functions and cellular processes occurring in sponges.