Until the last decade it was assumed that most marine species have pronounced gene flow over vast areas, largely because of their potential for dispersal during early life stages. However, recent genetic, modeling, and field studies have shown that marine populations may be structured at scales that are inconsistent with extensive dispersal of eggs and larvae. Such findings have stimulated the birth of new studies explaining the mechanisms that promote population structure and isolation in the oceans, in the face of high potential for dispersal. Here we study the vertical and horizontal distribution of cod (Gadus morhua) eggs in relation to small-scale circulation and water column hydrography in a coastal location of southern Norway. Previous studies conducted in this region have shown that cod populations inhabiting fjord locations, which are on average 30 km apart, are genetically differentiated, a remarkable outcome considering that Atlantic cod have pelagic egg stages and long pelagic larval duration. We document that cod eggs are found in greater abundance in shallow water layers, which on average are flowing up the fjord (away from the open ocean), and in the inner portion of the fjord, which is subject to lower current speeds compared to the outer or mouth of the fjord. Eggs were found to be neutrally buoyant at shallow depths, a trait that also favors local retention, given the local circulation. The same patterns held during two environmentally contrasting years. These results strongly suggest that population structure of Atlantic cod is favored and maintained by a balance between water circulation and egg characteristics.