Male-male competition and female mate choice were investigated in a field population of the Cortez damselfish, Stegastes rectifraenum. Theoretical considerations suggest that female choice should be important when: female mobility is high; breeding is not restricted to a brief, explosive period; and females are capable of rejecting mates despite persistent male mating efforts. Stegastes rectifraenum clearly meets all of these criteria. Focal observations indicated that male body size was significantly positively correlated with male reproductive success, whereas behavioural traits, such as aggressiveness and courtship vigour, were not. An experiment in which successful males were removed from their territories and recolonization monitored indicated that males compete for high-quality territories. In a second experiment, standardizing the quality of male nest sites caused the relationship between male body size and reproductive success to disappear. Contrary to expectations based on current theoretical developments, these results suggest that the single most important correlation with male reproductive success (body size) is produced indirectly by female choice of nest-site quality in combination with male-male competition for high-quality territories. © 1990 The Association for the Study of Animal Behaviour.