The spiny lobster Panulirus homarus rubellus is endemic to the Southwest Indian Ocean, where it inhabits a narrow continental shelf between an exposed coast and the upper reaches of the strong western-boundary Agulhas Current. Long-lived phyllosoma larvae released in this dynamic ocean environment have an uncertain fate—they can be retained over the shelf by sub-mesoscale processes, dispersed downstream along the coast or across the Mozambique Channel, or become entrained in the Agulhas Current, and presumably lost. To assess gene flow and population genetic structure, we analyzed mitochondrial cytochrome oxidase subunit 1 and hypervariable control region sequences, and 19 nuclear microsatellite loci obtained from lobsters collected at nine sites in eastern South Africa, Mozambique and southeast Madagascar. Clustering analyses confirmed genetic connectivity among all populations, and gene flow patterns supported the hypothesis that nearshore processes, such as lee eddies and counter currents, retain some phyllosomas over the shelf; whereas, net gene flow direction was moderate towards the southwest. The Mozambique Channel did not impede contemporary gene flow from Madagascar to the African shelf, but return gene flow was rare. Different marker types showed contrasting gene flow patterns during contemporary and evolutionary periods, when Pleistocene glacial/interglacial cycles would have affected sea level, ocean currents and dispersal patterns. Despite genetic connectivity and the importance of local recruitment, recent gene flow suggests an ancillary source/sink dynamic concordant with the prevailing southwesterly direction of boundary currents at the shelf-edge—a factor to consider in regional fisheries and conservation strategies.