Abstract Larval behaviour is important to dispersal and settlement, but is seldom quantified. Behavioural capabilities of larval Lutjanus carponotatus in both offshore pelagic and reef environments at Lizard Island, Great Barrier Reef were observed in situ to determine if they were sufficient to influence dispersal. Offshore, larvae swam with higher directional precision and faster on the windward side of the island (28 cm.s−1) than on the leeward side (16 cm s−1). Most larvae swam directionally. Mean swimming directions were southerly in the windward area and northerly in the leeward area. Larvae avoided the surface and remained mostly between 3–15 m. Larvae released near reefs were 2–3 times faster swimming away from reefs (19 cm s−1) than swimming toward or over them (6–8 cm s−1). Speed swimming away was similar to that offshore. Of 41 larvae released near reefs, 73%reached the reef, 59% settled, and 13% of those reaching the reef were eaten. Larvae settled onto hard and soft coral (58%), topographic reef features (29%) and sand and rubble (13%). Settlement depth averaged 5.5 m (2–8 m). Before settling larvae spent up to 800 s over the reef (mean 231 s) and swam up to 53 m (mean 14 m). About half of the larvae interacted with reef residents including predatory attacks and aggressive approaches by residents.