The temporal and spatial patterns of larval settlement of the bluehead wrasse, Thalasoma bifasciatum, were documented in the San Blas Islands of Panama. Daily censuses indicated that larvae settle onto coral reefs in brief episodes that tended to occur around the new moon and peak in intensity between August and December of each year. The magnitude of settlement each day was unrelated to changes in the local population size but was found to be significantly correlated with the nightly catch of planktonic reef fish larvae in the waters over the reef. The spatial pattern of settlement was examined on three scales. On a large geographic scale, 24 reefs within 1000 km2, there was tremendous variability in settlement intensity that was very consistent from one year to the next. The best correlate of recruit density was exposure to the onshore current. It is suggested that some large—scale oceanographic process determines the intensity of settlement of bluehead wrasses on this scale. The densities of adults on these reefs directly reflected the densities of recruits. Counts of daily otolith increments indicated that those larvae that settled onto low—density reefs subsequently grew significantly faster. On an intermediate scale, sites within 1 km2, there was no consistency among sites or months in settlement intensity, suggesting that variance in settlement intensity on this scale may be the product of random processes. On the smallest scale, habitat selection within a patch reef, it was found that recruits had distinct preferences in their choices of settlement sites. The daily mortality schedule of bluehead wrasses indicated that mortality was extremely high for the first 3 d on the reef. Juvenile mortality was, furthermore, found to be independent of density. As a result, the patterns of larval settlement of bluehead wrasses persisted into the adult population relatively unchanged. It is therefore proposed that the distribution and abundance of bluehead wrasses in this region are more a product of the external processes controlling larval settlement than of any biological interactions within the reef assemblage.