We documented inshore spawning of the recreationally important cobia (Rachycentron canadum) in Port Royal Sound (PRS) and St. Helena Sound (SHS), South Carolina, during the period from April to June in both 2007 and 2008. Histological analysis of ovaries confirmed the presence of actively spawning females inshore, and gonadosomatic index (GSI) values from females collected inshore (mean=7.8) were higher than the values from females caught offshore (mean=5.6); both of these mean values indicate that spawning occurred locally. Additionally, we conducted an ichthyoplankton survey in 2008 and found cobia eggs and larvae as far as 10 and 15 km inshore from the mouths of SHS and PRS, respectively. A study of egg development that we conducted in 2007 and 2008 using hatchery-reared cobia eggs provided descriptions of embryological development of cobia. Comparison of visual and quantitative characteristics of the field-collected eggs with those of the hatchery-reared eggs allowed positive identification of eggs collected in plankton samples. The ages of field-collected eggs and presence of females with hydrated oocytes in PRS and SHS observed in our ichthyoplankton survey and histological analysis indicated that wild cobia spawn in the afternoon and early evening. The inshore migration of cobia from April to June, the presence of actively spawning females, significantly higher GSI values, and the collection of eggs inside PRS and SHS all confirm that these estuaries provide spawning habitat for cobia. Because of the potential for heavy exploitation by recreational anglers as cobia move inshore to spawn in South Carolina, current management strategies may require review.