Biophysical modeling and morphologic data from the fossil record were used to investigate the functional significance of changes in thallus morphology during the early evolutionary history of dasycladalean algae (dasyclads), a clade of benthic marine macroalgae. Modeling results indicate that the addition of cylindrical appendages (laterals) to an upright main axis, a key morphological innovation in the evolution of dasyclad thallus form, can provide for large gains in light interception efficiency, near-maximum gains in this regard being achieved when the ratio of total lateral surface area to main axis surface area is 4 or greater. Among the 13 early Paleozoic study taxa, all but one was found to exceed this value. Modeling of surface area to volume ratios for early Paleozoic dasyclads indicates that laterals for these forms conveyed only modest gains in this regard and, therefore, likely played little role in improving nutrient uptake. For survivorship, it appears that increasing thallus complexity by developing laterals conveyed important benefits by imparting both compartmentalization and redundancy, thereby increasing the likelihood that lateral-bearing forms would survive attacks by early mesograzers. Trends and patterns in the fossil record support such a survival-enhancing role for laterals and are consistent with the initial evolution of these structures as an early manifestation of an evolutionary arms race between macroalgae and herbivores initiated near the Proterozoic/Phanerozoic boundary.