The Deepwater Horizon (DWH) disaster released crude oil in the Gulf of Mexico for 87 days, overlapping with the reproductive season and recruitment of the oyster Crassostrea virginica. The pelagic larval life stages of C. virginica are particularly vulnerable to contaminants such as polycyclic aromatic hydrocarbons (PAHs) and oil droplets. Based on their lipophilic properties, PAHs and oil droplets can adsorb onto phytoplankton and filter-feeding C. virginica larvae may be exposed to these contaminants bound to suspended sediment, adsorbed onto algal and other particles, or in solution. This study examined the effects of exposure of C. virginica larvae to algae mixed with DWH oil. In a 14-day laboratory exposure, 5 day-old C. virginica larvae were exposed to Tisochrysis lutea mixed with four concentrations of unfiltered DWH oil (HEWAF) in a static renewal system. Larval growth, feeding capacity, abnormality and mortality were monitored throughout the exposure. Total PAH (n = 50) content of the water medium, in which larvae were grown, were quantified by GC/MS-SIM. Oil droplets were observed bound to algae, resulting in particles in the size-range of food ingested by oyster larvae (1–30 μm). After 14 days of exposure, larval growth and survival were negatively affected at concentrations of tPAH50 as low as 1.6 μg L−1. GC/MS-SIM analysis of the exposure medium confirmed that certain PAHs were also adsorbed by T. lutea and taken up by oyster larvae via ingestion of oil droplets and/or contaminated algae. Long-term exposure to chronic levels of PAH (1.6–78 μg tPAH50 L−1) was shown to negatively affect larval survival. This study demonstrates that dietary exposure of oyster larvae to DWH oil is a realistic route of crude oil toxicity and may have serious implications on the planktonic community and the food chain.