The input of terrestrial silt and clay (hereafter mud) into coastal environments can alter sediment grain size distribution affecting the structure and functioning of benthic communities. The relationship between sediment mud content and macrofaunal community structure has been well documented, but not the effects on ecosystem function. In 143 plots from the mid-intertidal sites in 9 estuaries, we measured sediment properties, macrofaunal community composition and fluxes of O₂ and NH₄⁺ across the sediment–water interface to derive process-based measures of ecosystem function across the sand–mud gradient. We observed reductions in measures of macrofaunal diversity and decreases in the maximum density of key bioturbating bivalves (Austrovenus stutchburyi and Macomona liliana) with increased mud content. Concurrently, the maximum rates of sediment oxygen consumption (SOC), NH₄⁺ efflux (NH₄⁺) and biomass standardized gross primary production (GPPChl-a ) also decreased with increasing mud content. Environmental predictors explained 34–39% (P = 0.005–0.01) of the total variation in ecosystem function in distance-based linear models. After partitioning out the effect of mud, A. stutchburyi abundance was positively correlated and explained 25 and 23% (P = 0.0001) of the variation of SOC and NH₄⁺, respectively. Also, mud content (negatively correlated) and temperature (positively correlated) explained 26% of variability in GPPChl-a (P = 0.0001). Our results highlight the importance of increased mud content and the associated reduction in the abundance of strongly interacting key species on the loss of ecosystem function in intertidal sand flats.