Western rock lobster larvae have a 9–11 mo pelagic larval phase that makes them susceptible to the oceanographic environment, such as the poleward-flowing Leeuwin Current, surface winds, and wave-induced Stokes drift. An innovative oceanographic-larval modelling approach, which incorporated these physical drivers and complex larval behavior, was used to investigate the cause of the major reduction in postlarval (puerulus) settlement in the late 2000s. Individual-based biophysical larval models, taking into account the sensitivity to different wind effects on the surface water movement and different levels of puerulus swimming, were developed utilizing 19 yrs of meteorological and oceanographic data (1994–2012). Model optimization was achieved by assessing modelled and observed puerulus settlements along the Western Australian coast for 24 model simulations with different combinations of model parameters. A postmodel analysis then assessed the effect of the timing of larval release, abundance and spatial distribution of larval release, and duration of larval development. Model results revealed that a mismatch between the seasonal timing of spawning, larval development, and onshore current systems needed to return the larvae to the coast appears to be the primary cause of the low settlement in the late 2000s. Since the mid-2000s, there has been an earlier start of the spawning season due to warmer winter temperatures, which may have caused the ocean currents and eddies to diffuse the larvae in the open ocean before they can be transported back to the coast by onshore currents and weakened winter storms.