Understanding responses of marine algae to changing ocean temperatures requires knowledge of the impacts of elevated temperatures and the likelihood of adaptation to thermal stress. The potential for rapid evolution of thermal tolerance is dependent on the levels of heritable genetic variation in response to thermal stress within a population. Here, we use a quantitative genetic breeding design to establish whether there is a heritable variation in thermal sensitivity in two populations of a habitat-forming intertidal macroalga, Hormosira banksii (Turner) Descaisne. Gametes from multiple parents were mixed and growth and photosynthetic performance were measured in the resulting embryos, which were incubated under control and elevated temperature (20°C and 28°C). Embryo growth was reduced at 28°C, but significant interactions between male genotype and temperature in one population indicated the presence of genetic variation in thermal sensitivity. Selection for more tolerant genotypes thus has the ability to result in the evolution of increased thermal tolerance. Furthermore, genetic correlations between embryos grown in the two temperatures were positive, indicating that those genotypes that performed well in elevated temperature also performed well in control temperature. Chlorophyll a fluorescence measurements showed a marked decrease in maximum quantum yield of photosystem II (PSII) under elevated temperature. There was an increase in the proportion of energy directed to photoinhibition (nonregulated nonphotochemical quenching) and a concomitant decrease in energy used to drive photochemistry and xanthophyll cycling (regulated nonphotochemical quenching). However, PSII performance between genotypes was similar, suggesting that thermal sensitivity is related to processes other than photosynthesis.