Community organization is governed by a hierarchy of environmental variables that limit the performance or efficiency of organisms within a range of tolerable habitat conditions. Some of the more suitable habitats within a species fundamental niche often are not accessible and a species distribution instead represents a much smaller realized niche. On tropical reefs where macroalgae are subjected to continuous herbivore pressure, algal distributions and community assemblages may also rely on the availability of smaller scale spatial refugia within the reef. The majority of macroalgae across the back reefs of Moorea, French Polynesia occur in the protected narrow crevices and hole microhabitats provided by massive Porites spp. coral heads. Although the majority of space available for colonization is composed of exposed surfaces, macroalgae are rarely found on those surfaces. These distributions are determined initially by post-settlement mortality of young algal recruits in exposed habitats. Rates of consumption for two of the most common macroalgal species found in refugia across the back reef, Halimeda minima, and Amansia rhodantha, indicate that algal recruits in exposed habitats are limited by herbivory. Neither study species associated with refugia, H. minima nor A. rhodantha, were physiologically specialized to the environmental characteristics of the microhabitat. The integrated effect of higher irradiances outside microhabitats resulted in an over two-fold increase in oxygen production and growth performance for both species. Although investigations of photosynthetic response, using rapid light curves, revealed decreased photosynthetic capacity regardless of the light environment, potentially a result of self-shading and diurnal fluctuations in light availability. There was still an increased photosynthetic advantage in a higher light environment for the performance of the algal individuals. It appears that the establishment and distribution of algae across the back reef has resulted in a physiological tradeoff, where the negative effects of the microhabitat on photosynthesis and growth performance are outweighed by the opportunity for protection from herbivore consumption. The importance of herbivory as a dominate force on reef communities is apparent. However, integrating the concept of small scale refugia into community ecology as a determining factor in abundances and shaping community structure has received little attention. The results of the study demonstrate that the impact of herbivory, on occurrence and potentially the coexistence of many macroalgal species, ultimately is dependent upon the nature and availability of small scale spatial refugia across the back reef.