Ocean warming can alter natural selection on marine systems, and in many cases, the long-term persistence of affected populations will depend on genetic adaptation. In this study, we assess the potential for adaptation in the sea urchin Heliocidaris erythrogramma armigera, an Australian endemic, that is experiencing unprecedented increases in ocean temperatures. We used a factorial breeding design to assess the level of heritable variation in larval hatching success at two temperatures. Fertilized eggs from each full-sibling family were tested at 22 °C (current spawning temperature) and 25 °C (upper limit of predicted warming this century). Hatching success was significantly lower at higher temperatures, confirming that ocean warming is likely to exert selection on this life-history stage. Our analyses revealed significant additive genetic variance and genotype-by-environment interactions underlying hatching success. Consistent with prior work, we detected significant nonadditive (sire-by-dam) variance in hatching success, but additionally found that these interactions were modified by temperature. Although these findings suggest the potential for genetic adaptation, any evolutionary responses are likely to be influenced (and possibly constrained) by complex genotype-by-environment and sire-by-dam interactions and will additionally depend on patterns of genetic covariation with other fitness traits.