Underwater camouflage is the set of methods of achieving crypsis—avoidance of observation—that allows otherwise visible aquatic organisms to remain unnoticed by other organisms such as predators or prey.

Camouflage in large bodies of water differs markedly from camouflage on land. The environment is essentially the same on all sides. Light always falls from above, and there is generally no variable background to compare with trees and bushes. Near to the sea surface reflectivity and blue coloration are the most common form of camouflage. Below, countershading is more common, with blue coloration on the dorsal side and white on the ventral side. Below the epipelagic zone transparency is more frequent. In the aphotic zone red and black coloration are common, often in combination with bioluminescence. At the very deepest areas such as the benthic regions of the hadal zone, most animals use pale red and cream colors.

Camouflage in relatively shallow waters is more like terrestrial camouflage, where additional methods are used by many animals. For example, self-decoration is employed by decorator crabs; mimicry by animals such as the leafy sea dragon; countershading by many fish including sharks; distraction with eyespots by many fish; active camouflage through ability to change colour rapidly in fish such as the flounder, and cephalopods including octopus, cuttlefish, and squid.

The ability to camouflage oneself provides a survival advantage in the constant struggle between predators and prey. Natural selection has produced a wide variety of methods of survival in the oceans.

In Ancient Greece, Aristotle commented on the color-changing abilities, both for camouflage and for signalling, of cephalopods including the octopus, in his Historia animalium:

Three main camouflage methods predominate in the oceans: transparency, reflection, and counterillumination. Transparency and reflectivity are most important in the top 100 metres of the ocean; counterillumination is the main method from 100 metres down to 1000 metres; while camouflage becomes less important in the dark waters below 1000 metres. Most animals of the open sea use at least one of these methods to camouflage themselves.

Transparency is common, even dominant, in animals of the open sea, especially those that live in relatively shallow waters. It is found in plankton of many species, as well as larger animals such as jellyfish, salps (floating tunicates), and comb jellies. Many marine animals that float near the surface are highly transparent, giving them almost perfect camouflage. However, transparency is difficult for bodies made of materials that have different refractive indices from seawater. Some marine animals such as jellyfish have gelatinous bodies, composed mainly of water; their thick mesogloea is acellular and highly transparent. This conveniently makes them buoyant, but it also makes them large for their muscle mass, so they cannot swim fast. Gelatinous planktonic animals are between 50 and 90 per cent transparent. A transparency of 50 per cent is enough to make an animal invisible to a predator such as cod at a depth of 650 metres (2,130 ft); better transparency is required for invisibility in shallower water, where the light is brighter and predators can see better. For example, a cod can see prey that are 98 per cent transparent in optimal lighting in shallow water. Therefore, transparency is most effective in deeper waters.

Some tissues such as muscles can be made transparent, provided either they are very thin or organised as regular layers or fibrils that are small compared to the wavelength of visible light. Familiar examples of transparent body parts are the lens and cornea of the vertebrate eye. The lens is made of the protein crystallin; the cornea is made of the protein collagen. Other structures cannot be made transparent, notably the retinas or equivalent light-absorbing structures of eyes — they must absorb light to be able to function. The camera-type eye of vertebrates and cephalopods must be completely opaque. Finally, some structures are visible for a reason, such as to lure prey. For example, the nematocysts (stinging cells) of the transparent siphonophore Agalma okenii resemble small copepods. Examples of transparent marine animals include a wide variety of larvae, including coelenterates, siphonophores, salps, gastropod molluscs, polychaete worms, many shrimplike crustaceans, and fish; whereas the adults of most of these are opaque and pigmented, resembling the seabed or shores where they live. Adult comb jellies and jellyfish are mainly transparent, like their watery background. The small Amazon River fish Microphilypnus amazonicus and the shrimps it associates with, Pseudopalaemon gouldingi, are so transparent as to be "almost invisible"; further, these species appear to select whether to be transparent or more conventionally mottled (disruptively patterned) according to the local background in the environment.