In situ and modeled spatial distribution of squat lobster (Pleuroncodes monodon) larvae over the continental shelf off south central Chile (35-37°S) was analyzed along with currents and hydrography. We aimed to identify the main larval transport/retention characteristics in the study area, which constitutes the southernmost P. monodon fishing grounds embedded in the Humboldt Current System. We hypothesized that the main contribution to population renewal originates in the two persistent adult aggregations close to the nursery ground that occurs over a continental shelf terrace limited by two submarine canyons. Two extensive bio-physical field campaigns were carried out during the main 2001-2002 upwelling season field data indicated that larvae were released from late austral winter to spring from spots to the north and south of the nursery. Zoea I were found mainly below 50 m depth in southward-flowing waters, whereas older zoea dominated in northward flowing layers above 50 m. Larvae were circumscribed between the coast and the shelf break front and pelagic retention areas were identified over the widest shelf area. Megalopa and juveniles during March, were only found over the nursery area. Individual based simulations coupled to the output of a hydrodynamic model (climatological configuration) for the studied area, showed that the release sites close to the nursery made the largest contribution to recruitment. Sites further north could also contribute to recruitment if hatching occurred later in the upwelling season. The contribution of vertical behavior to larval success was also important, as was the former's interaction with the site and time of larval release. Our results support the relevance of coastal circulation (affected by topography) on the persistence of P. monodon populations off southern Chile, and the modulation of temporal variability. These results might apply to other abundant species in the area.