Variation in the phenotype or "quality" of dispersing individuals can shape colonization success and thus local dynamics and patterns of connectivity in a metapopulation. In marine reef systems, larval dispersal typically connects fragmented populations, and larval quality may be shaped by developmental history at the natal reef (e.g., parental effects) and/or by conditions in the pelagic environment (e.g., food, temperature, hydrodynamics, predator regime). We extract information recorded within the incremental bands of fish "ear stones" (otoliths) to reconstruct the early life histories of reef fish, to evaluate whether larval quality is a function of natal populations, dispersal histories, or both. We sampled sagittal otoliths from 282 common triplefins (Forsterygion lapillum) collected at approximately weekly, intervals between December 2003 and March 2004, from three sites within Wellington Harbor (New Zealand) and three sites along the adjacent Wellington South Coast. We used image analysis to quantify otolith traits and to reconstruct five larval phenotypes (pelagic larval duration, size-at-hatch, early larval growth, late larval growth, and an instantaneous larval growth rate), followed by a principal components analysis to derive a composite measure of larval quality. We used laser ablation-inductively coupled plasma-mass spectrometry to quantify otolith microchemistry, followed by a set of cluster analyses (based upon 13 statistical descriptors of time series for each of 11 elemental ratios) to identify and characterize two putative natal "source populations" and two putative "larval dispersal histories." We evaluated the relationship between larval quality, source populations, and dispersal histories using two-way ANOVA and MANOVA, and determined that larval quality of F. lapillum is a function of larval dispersal history and not source population identity. Specifically, larvae of F. lapillum with microchemical signatures consistent with retention and/or entrainment in the nutrient-enriched Wellington Harbor had traits associated with elevated larval quality (i.e., short pelagic larval durations, small size-at-hatch, fast larval growth, and fast instantaneous growth rates). Our results suggest that conditions in the pelagic larval environment shape larval quality and potentially mediate metapopulation connectivity. In the case of F. lapillum from Wellington Harbor, environmentally induced heterogeneity in larval quality may limit connectivity by favoring successful replenishment by locally retained larvae over long-distance dispersers.