Caracanthus typicus and Caracanthus unipinna are small, obligate coral-dwelling, scorpaeniform fishes (F. Caracanthidae). In the majority of individuals in these two species, the male gonad is an ovotestis with several ovarian features, including an apparently nonfunctional gonadal lumen and the frequent presence of healthy-appearing oocytes. In addition, it has a feature typical of secondary testes in the form of peripheral sperm sinuses located within the ovotestis wall. These features collectively suggest that males in these two species arise secondarily from females. Males and females of both species also have an unusual gonad architecture in which the gametogenic tissue is almost entirely surrounded by a peripheral lumen for much of its length. Among females, maturing oocytes project into the ovarian lumen on stalks of stromal tissue and the periphery of the gonadal lumen is lined with a distinctive tall columnar epithelium consistent with a secretory function. Such ovarian features present in three other scorpaeniform species are associated with the release of eggs that are bound together in a gelatinous matrix to form floating egg masses. The presence of such features in female C. typicus and C. unipinna suggests that Caracanthus may have a similar mode of reproduction.