Species that change colour present an ideal opportunity to study the control and tuning of camouflage with regards to the background. However, most research on colour-pattern change and camouflage has been undertaken with species that rapidly alter appearance (in seconds), despite the fact that most species change appearance over longer time periods (e.g. minutes, hours, or days). We investigated whether individuals of the horned ghost crab (Ocypode ceratophthalmus) from Singapore can change colour, when this occurs, and how it influences camouflage. Individuals showed a clear daily rhythm of colour change, becoming lighter during the day and darker at night, and this significantly improved their camouflage to the sand substrate upon which they live. Individuals did not change colour when put into dark conditions, but they did become brighter when placed on a white versus a black substrate. Our findings show that ghost crabs have a circadian rhythm of colour change mediating camouflage, which is fine-tuned by adaptation to the background brightness. These types of colour change can enable individuals to achieve effective camouflage under a range of environmental conditions, substrates, and time periods, and may be widespread in other species. © 2013 The Linnean Society of London, Biological Journal of the Linnean Society, 2013, 109, 257–270.