The transition phase describes a distinct post-settlement stage associated with the recruitment to benthic habitats by pelagic life stages. The habitat shift is often accompanied by feeding shifts and metamorphosis from larval to juvenile phases. Density-dependent settlement, growth and mortality are often the major factors controlling recruitment success of this phase. Habitat use also becomes more pronounced after settlement. The role of habitat-mediated post-settlement mortality is elucidated by focusing on the early life history of Atlantic cod (Gadus morhua) and cunner (Tautogolabrus adspersus) in the north-west Atlantic. In these species, settlement can occur over all bottom types, but habitat-specific differences in post-settlement mortality rates combined with size and priority at settlement effects on growth and survival determine recruitment and eventual year-class strength. These results and those from other temperate marine fish species along with work on tropical reef species emphasize the generality of habitat-based density-dependent mortality during the transition phase and its potential for population regulation. These results have implications for fisheries management and can be used to outline a procedure to assist managers in identifying and managing essential transitional habitats including the potential role of marine protected areas in habitat conservation.