The use of fossils in studies of character evolution is an active area of research. Characters from fossils have been viewed as less informative or more subjective than comparable information from extant taxa. However, fossils are often the only known representatives of many higher taxa, including some of the earliest forms, and have been important in determining character polarity and filling morphological gaps. Here we evaluate the influence of fossils on the interpretation of character evolution by comparing estimates of ancestral body size in fishes (non-tetrapod craniates) from two large and previously unpublished datasets; a palaeontological dataset representing all principal clades from throughout the Phanerozoic, and a macroecological dataset for all 515 families of living (Recent) fishes. Ancestral size was estimated from phylogenetically based (i.e. parsimony) optimization methods. Ancestral size estimates obtained from analysis of extant fish families are five to eight times larger than estimates using fossil members of the same higher taxa. These disparities arise from differential survival of large-bodied members of early branching lineages, and are not statistical or taphonomic artefacts. Estimates of ancestral size obtained from a limited but judicious selection of fossil fish taxa are more accurate than estimates from a complete dataset of extant fishes.