The effects of live foods and microencapsulated diets on growth, survival, body composition and digestive physiology of fish (mirror carp, Cyprinus =LQ) and penaeid shrimp ftna= japQnim) larvae were examined. Raising the lipid content of a microencapsulated enrichment diet from 18.3% to 33.6% improved accumulation of highly unsaturated fatty acids (HUFA) and total lipid in rotifers. Lipids in rotifers were assimilated by carp larvae, as demonstrated by improved growth and accumulation of HUFA in larvae reared on rotifers pre-fed the "high-lipid" diet. Poor diet digestibility coupled with low ingestion rates and low digestive enzyme activity in larvae were identified as contributing to the failure of a microencapsulated diet to support good growth and survival when fed directly to first-feeding carp. Preliminary testing indicates that digestibility of microencapsulated diets for fish larvae can be improved by inclusion of pancreatin. Experiments with Penaeus japonicus indicate that dietary requirements for protein, energy and HUFA by penaeid larvae are lower than previously thought. Foods of low protein content (Chaetoceros gladlia) or low digestibility (microencapsulated diet) elicited high trypsin activity in mysis larvae, compared to those fed Artemia. Larvae receiving both C , gmcilis and Artemi exhibited an intermediate level of trypsin activity - which may explain the superior growth and protein retention in postlarvae reared on the mixed regime. A microencapsulated diet did not support growth and carbon and nitrogen retention equivalent to that in larvae fed live food, despite the strong trypsin response, in mysis larvae. When used together with a low density of _C, p-racilis the microencapsulated diet produced postlarvae of the same size and tissue composition as those reared using live food. It is suggested that the algal co-feed may enhance growth through stimulation of trypsin secretion, supply of extra digestible nutrients or provision of unidentified specific growth enhancing factor(s).