Seasonal ichthyoplankton surveys were made in the lower Laguna Madre, Texas, to compare the relative utilization of various nursery habitats (shoal grass, Halodule wrightii; manatee grass, Syringodium filiforme; and unvegetated sand bottom) for both estuarine and offshore-spawned larvae. The species composition and abundance of fish larvae were determined for each habitat type at six locations in the bay. Pushnet ichthyoplankton sampling resulted in 296 total collections, yielding 107,463 fishes representing 55 species in 24 families. A broad spectrum of both the biotic and physical habitat parameters were examined to link the dispersion and distribution of both pre-settlement and postsettlement larvae to the utilization of shallow seagrass habitats. Sample sites were grouped by cluster analysis (Ward’s minimum variance method) according to the similarity of their fish assemblages and subsequently examined with a multiple discriminant function analysis to identify important environmental variables. Abiotic environmental factors were most influential in defining groups for samples dominated by early larvae, whereas measures of seagrass complexity defined groups dominated by older larvae and juveniles. Juvenile-stage individuals showed clear habitat preference, with the more shallow Halodule wrightii being the habitat of choice, whereas early larvae of most species were widely distributed over all habitats. As a result of the recent shift of dominance from Halodule wrightii to Syringodium filiforme, overall reductions in the quality of nursery habitat for fishes in the lower Laguna Madre are projected.