Sponges display a variety of reproductive strategies that have the potential to influence population genetic structure. Histological examination of ten reproductive individuals of the Western Australian sponge Haliclona sp. showed that this species broods embryonic larvae that are potentially limited in dispersal capabilities. Because sponges have the potential to propagate in a number of modes, allozyme electrophoresis was used to assess the relative importance of asexual and sexual reproduction to recruitment, and to quantify genetic subdivision over different spatial scales. Tissue samples from 227 sponges were collected from reefs within two areas 400 km apart: Hamelin Bay and Rottnest Island. Contrary to expectations for highly clonal populations, genotypic diversity within sites was high, no linkage disequilibrium was found, and there was no evidence of genotypic clustering within reefs. There was no genetic evidence that asexual reproduction is important for the maintenance of populations. Genetic comparisons were consistent with mixing of sexually produced recruits within reefs, on a scale up to a few hundred metres, but significant genetic subdivision between reefs (F-ST=0.069 at Hamelin Bay, 0.130 at Rottnest Island) indicated that water gaps of several hundred metres are effective at preventing dispersal. Subdivision between the two areas, separated by 400 km, was moderately greater (F-ST=0.142) than within, but the same alleles were predominant in the two areas. These genetic patterns are consistent with limited dispersal capabilities of brooded larvae.