This work describes the utilization of shallow, subtidal bays, associated with rocky shores, by the late-stage larvae and early juveniles of some common inshore fishes. Larval and early juvenile fishes were collected in seven small bays (30–50 m wide) between Port Alfred (33°36′S, 26°53′E) and Hamburg (33°17′S, 27°29′E), using a modified, beach seine net (500μm mesh). Four bays were sampled weekly during peak fish spawning (September-November 2004) to firstly assess whether larval fishes occur in these previously-unstudied habitats and secondly, to assess the extent of this utilization in terms of species occurrence, abundance and potential nursery function. An additional three replicate bays, situated > 50 km away near Bira were used for comparison. In total, 14 fish families represented by 26 taxa were recorded but the catch was dominated by a small suite of common species. Bays were extensively utilized by Sparidae (Diplodus capensis and Sarpa salpa), and to a lesser extent by Clinidae (Clinus superciliosus), Mugilidae (Liza spp.) and Kyphosidae (Neoscorpis lithophilus). Mean CPUE of larvae was high and exceeded 900 individuals per seine haul. Larval abundance peaked at 4000 larvae per haul and at these times, was dominated only by the two sparid species. Abundance of sparid larvae exceeds that recorded for these species in surf zones, estuaries or the shallow nearshore habitats sampled to date in temperate South Africa by an order of magnitude. Larval abundance was significantly higher during new moon sampling throughout the study period, but was not significantly different between repeated samples collected per site on each fieldtrip. The length-frequency of larvae utilizing the bays was dominated by postflexion stages ranging 7–14 mm SL. Length-frequency distribution of Diplodus, Sarpa, Clinus, Sparodon, Neoscorpis was indicative of grow-out and use of bays as interim nurseries. The nursery function of these bays is supported by gut analysis of a sub-sample of the dominant species, Diplodus capensis, which showed that these larvae were actively feeding in the area, predominantly on copepods. This work prompts further research on shallow habitats associated with rocky shores particularly the shelter and feeding role that these under-studied habitats are playing in the early life history of coastal fishes.