Kelp forests form important habitat in temperate subtidal regions but are threatened by a range of stressors that impact their abundance. In this study, we determined the effect of understory algae, a potential competitor of kelp, on the recruitment of the Australasian kelp, Ecklonia radiata, via their role in reducing light availability for early life-cycle stages of Ecklonia. A field experiment manipulating the abundance of understory algae showed no recruitment of outplanted microscopic sporophytes or naturally recruiting macroscopic sporophytes with a high (>80%) cover of understory algae. In contrast, both microscopic and macroscopic sporophytes recruited into plots with a medium (40 to 60%) and low (<20%) cover of understory algae. Light appears to be the important mechanism for the inhibition of kelp recruitment because a high cover of understory algae blocks up to 90% of available light for Ecklonia recruits. A laboratory experiment showed that low light (similar to the levels beneath the understory of high-coverage algal canopies) inhibited Ecklonia gametophyte growth and prevented microscopic sporophyte recruitment. Both high light (similar to levels when there is little understory algal canopy) and high zoospore density resulted in high sporophyte recruitment, suggesting important additive effects of those factors. This study indicates that an increase in the cover of understory algae results in low light, which inhibits Ecklonia sporophyte recruitment. The resilience of kelp will be strongly influenced by recruitment, and our results highlight that a decline in kelp canopy cover which leads to an increase in understory algae can ultimately feedback to negatively affect kelp recruitment.