Territorial male demoiselles Chromis dispilus were captured and bloodsampled underwater by scuba divers, from reef areas of low, medium, and high population density, over five spawning seasons. Measurements of densities of territory-holding males and the water-column population (females and nonterritory-holding males) were made from the same sites. Behavior of territory-holding males was assessed in relation to phase of the reproductive cycle and population density, using a remote underwater video system. Plasma levels of testosterone, 11-ketotestosterone (11KT), and 17 alpha,20 beta-dihydroxy-4-pregnen-3-one (17,20 beta P) were measured by RIA. Territory density was found to be proportional to population size. Males from high density sites spent more time chasing conspecifics and spawning during the phase of courtship display and spawning (spawning phase), but there were no differences in behavior between males from different density sites during periods of egg-brooding and defence (nesting phase). Plasma levels of all three steroids were elevated during the spawning phase, and low during the nesting phase. Absolute levels of gonadal steroids were higher in fish from areas of high population density during the spawning phase, than in fish from lower population densities. In one case, plasma 11KT and 17,20 beta P were also elevated at high density during the nesting phase. The results of the study indicate that steroid hormone levels are labile in response to changes in population density, and frequency of territorial interaction. Changes in levels of plasma androgens are consistent with the "challenge" hypothesis of social regulation of territorial aggression.(ABSTRACT TRUNCATED AT 250 WORDS)