Sponges (Phylum Porifera) are an evolutionary and ecologically significant group; however information on processes influencing sponge population distributions is surprisingly limited. Carteriospongia foliascens is a common Indo-Pacific sponge, which has been reported from the intertidal to the mesophotic. Interestingly, the distribution of C. foliascens at inshore reefs of the Great Barrier Reef is restricted to the intertidal with no individuals evident in adjacent subtidal habitats. The abundance of C. foliascens and substrate availability was first quantified to investigate the influence of substrate limitation on adult distribution. Pre-settlement processes of larval spawning, swimming speeds, phototaxis, vertical migration, and settlement to intertidal and subtidal substrate cues were also quantified. Notably, suitable settlement substrate (coral rubble) was not limiting in subtidal habitats. C. foliascens released up to 765 brooded larvae sponge(-1) day(-1) during the day, with larvae (80%±5.77) being negatively phototactic and migrating to the bottom within 40 minutes from release. Subsequently, larvae (up to 58.67%±2.91) migrated to the surface after the loss of the daylight cue (nightfall), and after 34 h post-release >98.67% (±0.67) of larvae had adopted a benthic habit regardless of light conditions. Intertidal and subtidal biofilms initiated similar settlement responses, inducing faster (as early 6 h post-release) and more successful metamorphosis (>60%) than unconditioned surfaces. C. foliascens has a high larval supply and larval behaviours that support recruitment to the subtidal. The absence of C. foliascens in subtidal habitats at inshore reefs is therefore proposed to be a potential consequence of post-settlement mortalities.