Diamondback terrapins (Malaclemys terrapin) inhabit estuaries in eastern USA and may tolerate salinity of sea-water for short durations. Many North American estuaries are adversely affected by anthropogenic impacts, such as pollution, dredging and invasion by non-native plants. Many nesting areas have been altered or destroyed, causing terrapins to nest on roadsides and artificial islands made of dredged substrate from bottom sediments. Shading by non-native plants may suppress development and reduce survival of embryos. In Barnegat Bay, New Jersey, USA, there is a mosaic of natural and degraded terrapin nesting habitats. We investigated the effects of dredge soil and shade on the hatching success of diamondback terrapins to determine whether nesting habitat could be increased by using dredged bottom sediments. In year 1, unshaded nests in natural loamy-sand had the highest hatching success (55.2%), while nests in dredge soil produced no hatchlings. In year 2, nests in unshaded loamy-sand had a hatching success of 85.3%, whereas those in dredge soil, aged 1 year, had a hatching success of 59.4%. Dredge soil improved as an incubation substrate after aging 1 year by the washout of salt. Nest temperatures were generally cool and produced mostly male hatchlings. Uncontaminated dredge soil may provide suitable nesting substrates for diamondback terrapins if used after one year, and may be particularly beneficial if used for constructing islands that provide new nesting sites with reduced access of mammalian predators.