Microhabitat choices and contact interactions among sedentary organisms can be a major determinant of benthic communities on coral reefs. Sponge substratum choices and interactions with other benthic organisms are poorly understood. We quantified sponge substratum preferences and interactions along depth (5,10 and 15m), landward and seaward exposures, and reef aspect on coastal coral reefs in Kimbe Bay, Papua New Guinea. A high proportion (55%) of sponge colonies occurred on calcium carbonate rock, and coral rubble (9%) even though these represented a small proportion of the available substratum (10% and 4% respectively). We recorded 30,413 interactions of sponges with the 8 major benthic taxa. Sponges primarily interacted with corals (~35%), algae (~30%) and crustose coralline algae (CCA) (~26%) that represented ~46%, ~21% and ~11% of the substratum cover respectively. Stand-off was the most common interaction type with 72% (21,968). When overgrowth occurred, sponges were winners over corals (92%), CCA (81%) and macroalgae (64%). Thus, sponges avoid other biological substrata by preferentially settling on CaC rock, but when they do encounter algae and corals, they frequently overgrow their space competitors.