Behavior of settlement-stage (10–17 mm SL) larvae of five chaetodontid species (Chaetodon auriga, C. aureofasciatus, C. rainfordi, C. plebeius, and Chelmon rostratus) captured in light traps was investigated in open water and over coral reefs at Lizard Island, Great Barrier Reef. Average swimming speeds of all species in open water (18–26 cm s−1) were greater than average current speeds; larvae swam several meters deeper off the deeper east side of the island than off the west side, and most larvae swam directionally. Near coral reefs, about 37% of larvae swam offshore at speeds that were frequently greater than those at which they swam toward or over reefs. After a mean of 5 min, 40% of larvae reaching reefs swam away offshore, many after harassment by resident fishes. About 5% were eaten; the rest settled in a mean of 2 min. Chaetodon plebeius never settled. Non-predatory resident fishes strongly influenced the distribution of butterflyfish settlers. The three species that settled in usable numbers had species-specific settlement depths and substratum, primarily live corals. Comparing these results to studies on larger juveniles shows that individuals become increasingly selective about habitat (usually coral taxa) as they grow. Larval settlement behavior of chaetodontids is more similar to that of pomacentrids than that of lutjanids or serranids, but some features are shared by all families.