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Ocean warming and acidification caused by increases of atmospheric carbon dioxide are now thought to be major threats to coral reefs on a global scale. Here we evaluated the environmental conditions and benthic community structures in semi-closed Nikko Bay at the inner reef area in Palau, which has high pCO2 and seawater temperature conditions with high zooxanthellate coral coverage. Nikko Bay is a highly sheltered system with organisms showing low connectivity with surrounding environments, making this bay a unique site for evaluating adaptation and acclimatization responses of organisms to warmed and acidified environments. Seawater pCO2/Ωarag showed strong gradation ranging from 380 to 982 µatm (Ωarag: 1.79–3.66), and benthic coverage, including soft corals and turf algae, changed along with Ωarag while hard coral coverage did not change. In contrast to previous studies, net calcification was maintained in Nikko Bay even under very low mean Ωarag (2.44). Reciprocal transplantation of the dominant coral Porites cylindrica showed that the calcification rate of corals from Nikko Bay did not change when transplanted to a reference site, while calcification of reference site corals decreased when transplanted to Nikko Bay. Corals transplanted out of their origin sites also showed the highest interactive respiration (R) and lower gross photosynthesis (Pg) to respiration (Pg:R), indicating higher energy acquirement of corals at their origin site. The results of this study give important insights about the potential local acclimatization and adaptation capacity of corals to different environmental conditions including pCO2 and temperature.