The damselfish genus Stegastes (family Pomacentridae) is represented by 13 species in shallow tropical and subtropical seas of the Indo-West Pacific region. Most of these species and their synonyms have been described in the genera Pomacentrus or Eupomacentrus. Those recognized as valid in the present study (with approximate distributions) include S. altus (southern Japan and Ryukyu lslands), S. albifasciatus (widespread Indo-Pacific; eclipticus is a synonym), S. apicalis (eastern Australia), S. aureus (central Oceania), S. emeryi (Pitcairn Group and Tuamotu Archipelago), S. fasciolatus (widespread Indo-Pacific, often identified as jenkinsi), S. gascoynei (southern Coral Sea-northern Tasman Sea), S. insularis n.sp. (Christmas Island, Indian Ocean, and Marcus Island, Pacific Ocean), S. limbatus (Mauritius, Réunion, and Madagascar), S. lividus (widespread Indo-Pacific), S. nigricans (widespread Indo-Pacific), S. obreptus (W. Pacific and E. Indian Ocean), and S. pelicieri n. sp. (Mauritius). S. insularis possesses 12 dorsal spines and is allied to S. altus, differing by having 2½ instead of 3½ scale rows above the lateral line, and by lacking free lower fin rays on the pectoral fin. S. pelicieri is distinguished by 14 dorsal spines and a distinctive color pattern which includes blue spots and bright yellow on the rear margin of the dorsal fin and tips of the caudal lobes. Detailed descriptions are provided for the new species; and a diagnosis, remarks on distribution, morphological comparisons, and ecology are given for each species. In addition, head drawings, diagnostic illustrations, and underwater photographs are included.