Countershading colouration, where an animal’s dorsal surface is darker than the ventral side, is widely regarded as one of the most important forms of protective colouration. Two key mechanisms relating to camouflage have been proposed: self-shadow concealment, where the gradation of body shading cancels out the body’s self-shadow, and background matching, where dark/light colouration may enhance concealment when prey are viewed from above or below. However, it is not clear whether these mechanisms are mutually exclusive or might operate differently in terrestrial and aquatic optical environments. We investigated countershading colouration in a freshwater fish that can change its colouration, the western rainbowfish (Melanotaenia australis). We manipulated both the intensity of downwelling light and the reflectance of the visual background (when viewed from above and from the side) to tease apart the potential mechanisms of concealment. While light intensity had no significant affect on dorsal and ventral body reflectance, a high reflectivity substrate caused both dorsal and ventral surfaces to become paler, whereas a low reflectivity substrate caused fish to become darker. Our findings support the notion that concealment by background matching may be particularly effective in aquatic habitats where shadowing is minimal and light is often highly diffused.