The Permian-Triassic mass extinction was the most severe biotic crisis in the past 500 million years. Many hypotheses have been proposed to explain the crisis, but few account for the spectrum of extinction selectivity and subsequent recovery. Here we show that selective losses are best accounted for by a combination of lethally warm, shallow waters and anoxic deep waters that acted to severely restrict the habitable area to a narrow mid-water refuge zone. The relative tolerance of groups to this double whammy provides the first clear explanation for the selective extinction losses during this double-pulsed crisis and also the fitful recovery. Thus, high temperature intolerant shallow-water dwellers, such as corals, large foraminifers and radiolarians were eliminated first whilst high temperature tolerant ostracods thrived except in anoxic deeper-waters. In contrast, hypoxia tolerant but temperature intolerant small foraminifers were driven from shallow-waters but thrived on dysoxic slopes margins. Only those mollusc groups, which are tolerant of both hypoxia and high temperatures, were able to thrive in the immediate aftermath of the extinction. Limited Early Triassic benthic recovery was restricted to mid-water depths and coincided with intervals of cooling and deepening of water column anoxia that expanded the habitable mid-water refuge zone.