Embryos of beach-spawning California Grunion incubate terrestrially buried in sand above the tide line. Out of water, these marine teleosts may encounter osmotic challenges including dilution by rainfall or freshwater runoff, or hypersalinity from evaporation or human activities. To test the physiological tolerance of California Grunion embryos, we incubated them in sand at different, ecologically relevant salinities, bracketing their physiological tolerance between 16 and 48 ppt. Fertilization percentage, embryo survival, hatching success, and larval length all decreased when salinity was higher or lower than control seawater, 32 ppt. Some embryos developed deformities that prevented hatching when incubated at high salinities. Mortality at each life stage resulted in significantly lower total survival in hyposaline or hypersaline incubation conditions. Effects of altered salinity include significantly reduced fertilization of eggs, greater mortality of zygotes, smaller hatchlings, and significantly decreased ability to hatch, even for apparently viable full-term embryos. California Grunion eggs are vulnerable to lethal and sublethal effects of altered salinity during early development in beach sand. Coastal management should strive to avoid potentially serious negative effects of altered salinity on the California Grunion's beach nursery grounds.