It is still debated vigorously whether sexual selection can result in speciation without physical barriers to gene flow. In this study, we used field data and molecular methods to investigate the gold–normal color polymorphism in two endemic cichlid fish species of crater lake Xiloá, Nicaragua. We found significant assortative mating by color in both Amphilophus xiloaensis and A. sagittae. Focusing on A. xiloaensis, microsatellite allele frequencies, an assignment test, and model-based cluster analysis demonstrates significant and clear genetic differentiation (FST= 0.03) between gold and normal individuals in sympatry. In addition, we find genetic differentiation between all three sympatric and ecologically distinct Midas cichlid species of Lake Xiloá, A. amarillo, A. sagittae, and A. xiloaensis (FST= 0.03 – 0.19), and clear genetic isolation of these species from their closest relative (A. citrinellus) in the neighboring great lake Managua. The A. xiloaensis gold morph is genetically more distinct from the lake's other two Midas cichlid species than is A. xiloaensis-normal. Thus, we have identified sexual isolation based on color that is evident in population genetics and mate choice. Our results suggest that sexual selection through color assortative mating may play an important role in incipient sympatric speciation in Midas cichlids of Nicaragua.