Successful recruitment in corals is important for the sustenance of coral reefs, and is considered a demographic bottleneck in the recovery of reef populations following disturbance events. Yet several factors influence larval settlement behaviour, and here we quantified thresholds associated with light attenuation and accumulated sediments on settlement substrates. Sediments deposited on calcareous red algae (CRA) directly and indirectly impacted coral settlement patterns. Although not avoiding direct contact, Acropora millepora larvae were very reluctant to settle on surfaces layered with sediments, progressively shifting their settlement preference from upward to downward facing (sediment-free) surfaces under increasing levels of deposited sediment. When only upward-facing surfaces were presented, 10% of settlement was inhibited at thresholds from 0.9 to 16 mg cm− 2 (EC10), regardless of sediment type (carbonate and siliciclastic) or particle size (fine and coarse silt). These levels equate to a very thin (< 150 μm) veneer of sediment that occurs within background levels on reefs. Grooves within settlement surfaces slightly improved options for settlement on sediment-coated surfaces (EC10: 29 mg cm− 2), but were quickly infilled at higher deposited sediment levels. CRA that was temporarily smothered by sediment for 6 d became bleached (53% surface area), and inhibited settlement at ~ 7 mg cm− 2 (EC10). A minor decrease in settlement was observed at high and very low light intensities when using suboptimal concentrations of a settlement inducer (CRA extract); however, no inhibition was observed when natural CRA surfaces along with more realistic diel-light patterns were applied. The low deposited sediment thresholds indicate that even a thin veneer of sediment can have consequences for larval settlement due to a reduction of optimal substrate. And while grooves and overhangs provide more settlement options in high deposition areas, recruits settling at these locations may be subject to ongoing stress from shading, competition, and sediment infilling.