The current work was designed to evaluate the role of algal settlement on the available substrate around the coral reef as a preliminary step towards the successive coral settlement in a reef area. The potential of algal settlement around the reef at Hurghada area was measured using glass microscopic slides as artificial substrate. The glass slides were mounted in groups of 10 slides each at five sites. The slides were placed in two groups representing the inner protected reef and the outer exposed one. The slides were collected and examined at 1, 3 and 6 months after installation. The results showed that number of algae species as well as small invertebrates tend to colonize the available space during the first month of installation. The number and intensity of the majority of these species was declined during the course of this study leaving only the slide to be dominated by two encrusting calcareous algae. The results also indicated that the rate of settlement was much lower in the outer reef slides than the inner reef slides, where the slides were almost completely covered with encrusting calcareous algae within 6 months. The statistical analysis of the data also showed significant differences between the localities in their potential of settlement. However, these differences are significantly affected by the time allowed and the site where the substrate is available. The results showed that the area around Hurghada have a high potential for coral settlement if we can create more suitable spaces and allowing the natural course of events to take place.