The large majority of bony coral-reef fish species have a larval phase that is pelagic for several days to months before leaving the open water environment to settle into a demersal existence. This dramatic life-history transition from pelagic to demersal habitat is poorly understood, with much of what we think we know about it being based on studies of postsettlement individuals. Direct observations of settlement are uncommon, and largely anecdotal. In the present study settlement-stage larvae captured in light traps (Lizard Island, Great Barrier Reef, LI) or crest nets (Rangiroa Atoll, Tuamotu Islands, RA) were released 5-10 m seaward from the outer edge of fringing and lagoon reefs (LI) or over scattered lagoonal coral heads (RA), and their behaviour and interactions with reef residents observed by divers. A total of 565 individuals (LI = 547, RA=11) of eight families (15 genera, 19 species) were released and observed. Overall, only 6.6% of individuals were eaten by predatory fishes (one by a squid). Surprisingly, 53.6% of individuals, swam away from the reef, usually within a short time after release, but in some cases, larvae swam over the reef for various periods before swimming away. Overall, 40.2% of individuals settled, and 6.2% were eaten. There were species-specific differences in these values, and location-specific differences were common (e.g., windward vs leeward vs lagoonal reefs). These observations show the complexity of settlement, and refute the simplifying assumption that settlement behaviours and results differ little among species or locations.