Marine organisms challenge the classical theories of local adaptation and speciation because their planktonic larvae have the potential to maintain high gene flow. The marine-speciation paradox is illustrated by contact zones between incipient species that are so large that allopatric divergence seems unlikely. For this reason any mechanism preventing sympatric larvae of two incipient species from coexisting in the same habitats can be a powerful promoter of speciation. The contact zone between two hybridizing taxa of mussel, Mytilus edulis and M. galloprovincialis, in Europe provides an excellent example. Although the zone itself extends over thousands of kilometres, the opportunities for interbreeding are considerably reduced by the small-scale mosaic structure of the zone, where local patches of each taxon alternate at scales of kilometres or less, in response to locally variable ecological factors. Habitat choice by settling larvae would be a less costly mechanism than post-settlement selection to maintain such a mosaic structure. Unfortunately the role of selective settlement has remained hypothetical because larvae could not be scored by classical genetic markers. PCR markers allowed us to study larvae and settlement in ecologically contrasting sites within the zone. We show that only a subset of the genotypes present in the plankton settle in some sites, and that the adults on these sites show the same genetic bias. Genetically based variation in pre-settlement processes therefore accounts for the ecological segregation observed, though it is not the only factor involved in limiting successful interbreeding. The present dataset also supports previous reports of partial spawning asynchrony.