Great effort continues to focus on ecosystem restoration and reduction of nutrient inputs thought to be responsible, in part, for declines in estuary habitats worldwide. The ability of environmental policy to address restoration is limited, in part, by uncertainty in the relationships between costly restoration and benefits. Here, we present results from an 18-y field investigation (1990-2007) of submerged aquatic vegetation (SAV) community dynamics and water quality in the Potomac River, a major tributary of the Chesapeake Bay. River and anthropogenic discharges lower water clarity by introducing nutrients that stimulate phytoplankton and epiphyte growth as well as suspended sediments. Efforts to restore the Chesapeake Bay are often viewed as failing. Overall nutrient reduction and SAV restoration goals have not been met. In the Potomac River, however, reduced in situ nutrients, wastewater-treatment effluent nitrogen, and total suspended solids were significantly correlated to increased SAV abundance and diversity. Species composition and relative abundance also correlated with nutrient and water-quality conditions, indicating declining fitness of exotic species relative to native species during restoration. Our results suggest that environmental policies that reduce anthropogenic nutrient inputs do result in improved habitat quality, with increased diversity and native species abundances. The results also help elucidate why SAV cover has improved only in some areas of the Chesapeake Bay.