The relative importance of pre-settlement and post-settlement processes in limiting recruitment rates of the colonial ascidian Diplosoma similis was established through (1) direct observations of larval dispersal, (2) comparison of pre-settlement and post-settlement mortality rates, and (3) determination of whether larval settlement rates limit the areal coverage of adults. During a 1-5 min planktonic larval phase most larvae swam 0-4 m, usually in the direction of the reef, and settled at a depth less than or equal to that of the parent colony. Between larval release and settlement, benthic and planktonic mortality sources killed 41-4% of the larvae, while at least 90% of all newly settled colonies died within 1 mo post-settlement. The larval settlement rate was greater than 4600 [larvae.sup..] [m.sup.-2.sup.yr.sup.-1], which in the absence of growth, was too low to account for the percent cover of adults. However, since the annual supply of recruits would occupy >40% of the space normally inhabited by potentially long-lived adults, it seems unlikely that larval settlement rates limit the percent cover of this ascidian. These results suggest that larval habitat selection determines the vertical zonation of recruits and post-settlement mortality determines the density of juvenile colonies.