Petroleum hydrocarbons are among contaminants of emerging concern in the marine environment, with negative impacts documented across a range of taxa. Marine sponges form an abundant and diverse component of benthic environments, including the Australian North-West Shelf near intensive oil and gas extraction operations. Sponges often dominate deep benthic communities, where they perform important functional roles including recycling of nutrients, aiding in bioerosion and consolidation processes, in addition to providing habitat to diverse epi- and endofauna. Despite their abundance and ecological importance, little is known about how sponges respond to petroleum hydrocarbons, particularly at the molecular level. This study combined a traditional ecotoxicological endpoint (larval settlement) with a non-conventional endpoint (gene expression) to examine the effects of a water accommodated fraction (WAF) of partially weathered condensate on the larval phase of the common Indo-Pacific sponge species, Phyllospongia foliascens. Results revealed larval P. foliascens is more resistant to condensate exposure than other taxa, with 50% settlement observed at the highest treatment tested (100% WAF). However, marked changes in global larval gene expression were evident at lower WAF exposure treatments (≥ 20% WAF), with genes that may play a role in detoxification and oxidative stress identified. Notably, some of these genes displayed typical concentration-response patterns allowing the derivation of no significant effect concentrations (NSECs), which ranged from 3.4% to 8.8% WAF and represent good candidate markers for future functional gene assessments.