The Critically Endangered red handfish persists as a small, fragmented wild population supported by an ongoing captive breeding program. To characterise genetic diversity relevant to both wild population conservation and captive breeding, whole-genome sequencing was conducted on individuals, representing most captive founder lineages. Principal component analysis (PCA) identified three major genetic clusters, revealing considerable diversity and structure among wild-collected founders. Although there was an overall high degree of variation, pairwise kinship analyses detected unexpectedly high relatedness between some founders, including levels consistent with close kin (e.g. siblings or parent–offspring pairs), indicating potential inbreeding. To assess inbreeding history, runs of homozygosity (ROH) analysis was performed, which identified several individuals carrying long homozygous regions consistent with recent shared ancestry. Outcrossing with genetically distinct lineages, however, led to a substantial reduction of ROH in the resulting offspring. Demographic history analysis demonstrated a sharp decline in effective population size, suggesting a population bottleneck within the last 50–60 generations. Historical effective population size was estimated to exceed 10,000, compared to approximately 20 to 30 in the most recent generation examined. The low contemporary effective population size suggests that the remaining genetic diversity is highly vulnerable to erosion through genetic drift, prompting the incorporation of additional wild lineages into the captive breeding program. These findings provide an initial genomic characterisation of population structure, relatedness, and inbreeding in red handfish, supporting ongoing captive breeding and providing insights into the wild population.