A circular arena with a 6 m diameter was established in a shallow (< 2 m deep) sand patch on the leeward side of Curlew Caye to test alternative hypotheses concerning the habitat characteristics and social cues that E. lori settlers might use to choose sponge habitat. Dye tests were conducted each day to measure current speed, direction, and to observe mixing. For each experiment, two habitat types were placed in alternating positions at 60-degree intervals along the arena’s perimeter (e.g. 3 yellow sponges x 3 PVC pipes) and the position of habitat types was rotated 180o midway through each experiment. Following a 2 min acclimation period, individual settlers were released from a glass jar onto the sand in the center of the arena and allowed to choose from among the habitat types being tested. Settlers that did not move from the center of the arena within 5 minutes of release were excluded from the experiment (n = 82 of 344 fish). Preliminary observations showed that settlers remained on their first habitat choice for >24 hours. Thus, ‘preference’ was recorded by a snorkeling observer as the first habitat with which a settler made contact. A test ended once the settler made contact with the outer surface of either a sponge or PVC pipe. Data were analyzed using a chi-square goodness of fit test (P = 0.05). Following initial trials, sensory cue manipulations were conducted using the arena to determine which sensory cues E. lori settlers use when choosing settlement habitat.