Habitat may have a primary role in determining the distribution and abundance of species, yet ecologists have historically overlooked its importance. Models of habitat selection are briefly reviewed. A new conceptual and analytical model is presented that explains how dispersing organisms find and settle at a given location based upon habitat structural features providing cues for settlement. The model is based on a sequential process of dispersal, settlement, and establishment that can be described by probabilities. The spatial settlement pattern of juvenile individuals determines adult distribution and abundance. Evidence is provided that structural features of the habitat may be more effective cues than are food supply, conspecific density, or the absence of an antagonistic species. This is the habitat-cue hypothesis of species distribution and abundance. The hypothesis is intended to stimulate greater investigation into the role of physical structure and environmental cueing in habitat selection by all types of organism. The hypothesis also predicts that a species distribution in nature is determined by habitat more than any other factor.