Considerable progress in our understanding of the population genetic changes associated with biological invasions has been made over the past decade. Using selectively neutral loci, it has been established that reductions in genetic diversity, reflecting founder effects, have occurred during the establishment of some invasive populations. However, some colonial organisms may actually gain an ecological advantage from reduced genetic diversity because of the associated reduction in inter-colony conflict. Here we report population genetic analyses, along with colony fusion experiments, for a highly invasive colonial ascidian, Didemnum vexillum. Analyses based on mitochondrial cytochrome oxidase I (COI) partial coding sequences revealed two distinct D. vexillum clades. One COI clade appears to be restricted to the probable native region (i.e., north-west Pacific Ocean), while the other clade is present in widely dispersed temperate coastal waters around the world. This clade structure was supported by 18S ribosomal DNA (rDNA) sequence data, which revealed a one base-pair difference between the two clades. Recently established populations of D. vexillum in New Zealand displayed greatly reduced COI genetic diversity when compared with D. vexillum in Japan. In association with this reduction in genetic diversity was a significantly higher inter-colony fusion rate between randomly paired New Zealand D. vexillum colonies (80%, standard deviation ±18%) when compared with colonies found in Japan (27%, standard deviation ±15%). The results of this study add to growing evidence that for colonial organisms reductions in population level genetic diversity may alter colony interaction dynamics and enhance the invasive potential of newly colonizing species.