Marine foundation species are being restored into inherently variable landscapes with multiple, interspersed habitat types. The influence of different neighbouring habitats on the persistence and community assembly of target foundation species could have significant, but previously overlooked, implications for the success of restoration efforts. We tested the effects of habitat setting (next to seagrass, seagrass and mangroves, and unvegetated sediments) and predation on the mortality of juvenile oysters and macroinvertebrate biodiversity on experimental reefs of the Sydney rock oyster, Saccostrea glomerata, at Grays Point, New South Wales. Juvenile oyster mortality was high across all habitat settings and was mostly driven by large, transient fish predators. Macroinvertebrate total abundance and community composition did vary among habitat settings, but not with predation, suggesting that neighbouring habitats influence the available source pools of species which colonise reefs. These findings highlight the importance of considering both local habitat setting, and processes across the broader estuary such as predation, in oyster reef restoration site selection to promote the survival of oysters and the biodiversity they support.