Coves near an ocean inlet in Little Egg Harbor in southern New Jersey may be important settlement areas for winter flounder (Pseudopleuronectes americanus), based on the high abundance of small postlarval individuals. During 1994–1996 we sampled in two coves and adjacent areas of this same estuary to determine if this pattern was annually consistent. Collections in spring and early summer indicated that small, recently-settled winter flounder (10–45 mm TL) were abundant in the coves from May to mid-June in every year with maximum mean densities ranging from 1.5–2.5 ind m−2 and that these same size individuals were never collected at these densities in other habitats in the same estuary. Densities in the coves declined soon after settlement, usually by late June to early July in each year. In order to determine factors that may influence these high settlement rates we examined aspects of habitat quality by determining habitat-specific growth rates in cages for recently-settled individuals (17.5–38.3 mm TL) both inside and outside the coves during 1995. These rates (3.7–9.1 wt d−1) overlapped those of other estuarine habitats (3.1–10.5 wt d−1) suggesting that habitat quality, based on growth, does not differentiate the coves from other potential settlement habitats. Mark/recapture experiments for recently settled individuals (range 13–70 mm TL) in 1994 and 1996 had low recapture rates (1% in both years) suggesting that dispersal from the cove occurred soon after settlement. This pattern confirms that these coves are used as settlement areas but they are probably not used as nurseries because winter flounder, at least in this system, do not settle and stay and, as a result, use other habitats as primary nursery areas.