This paper examines environmental and behavioral determinants of the habitat use and preferences of Indo-Pacific humpback dolphins inhabiting the Algoa Bay region on the south Eastern Cape coast of South Africa. In order to quantify the habitat use and preference, two indices were used, the Coefficient of Area Use (AU) and the Activity Index (AI). The dolphins inhabit a narrow strip of shallow, inshore waters of Algoa Bay and remain mostly within 400 m of the shore, in water less than 15 m deep, with no apparent preference for clear or turbid water. Water depth is probably the main factor limiting their inshore distribution, and the 25-m isobath seems to represent the critical depth. Within this confined, inshore distribution, dolphin activities concentrate in the vicinity of rocky reefs-their primary feeding grounds. Dolphin dependence on these shallow-water habitats is evident throughout the year and, consequently, the inshore shallow reefs are identified as the “key habitat” which is of primary importance for humpback dolphins in Eastern Cape waters. The dolphins' dependence on this restricted type of habitat within an already restricted inshore distribution makes them particularly vulnerable to alteration or loss of this habitat.