The reproductive behavior and early life history of Caesio caerulaurea are described from aquarium observations. Spawning occurred mainly between a pair plus sneakers from June 11 to July 16, 1994. Six easily distinguishable behavior phases were recognized in the spawning sequence : I) Nuzzling ; 2) Several males joining in courtship ; 3) Spiraling towards the surface ; 4) Pair spawning ; 5) Sperm release by sneakers ; and 6) Post spawning. Fertilized eggs were spherical, transparent, buoyant and unpigmented. They averaged 0.82 mm in diameter and contained a single oil globule averaging 0.17 mm in diameter. Hatching began about 23 hours after fertilization at 24.0±0.5°C. Immediately after hatching, larvae were 2.02-2.46 mm in total length and had a large, round, ellipsoidal yolk. A single oil globule with about 10 melanophores protruded extensively from the anterior end of the yolk. In 36 and 48-hour old larvae, one or two dendritic melanophores were observed just posterior to the auditory vesicle. Larval development of C. caerulaurea during the first 48 hours after hatching is described.