Variations in larval instar number are common among arthropods. Here, we assess the implications of temperature-mediated variations in larval instar number for larval development time, larval growth rates, and juvenile dry weight within the palaemonid shrimp, Palaemonetes varians. In contrast with previous literature, which focuses on terrestrial arthropods, particularly model and pest species often of laboratory lines, we use wild shrimp, which differ in their life history from previous models. Newly-hatched P. varians larvae were first reared at 5, 10, 17, 25, and 30°C to assess their thermal scope for development. Larvae developed at 17, 25, and 30°C. At higher temperatures, larvae developed through fewer larval instars. Two dominant developmental pathways were observed; a short pathway of four instars and a long pathway of five instars. Longer developmental pathways of six to seven instars were rarely observed (mostly at lower temperatures) and consisted of additional instars as ‘repeat’ instars; i.e. little developmental advance over the preceding instar. To assess the implications of temperature-mediated variation in larval instar number, newly-hatched larvae were then reared at 15, 20, and 25°C. Again, the proportion of larvae developing through four instars increased with temperature. At all temperatures, larval development time and juvenile dry weight were greater for larvae developing through five instars. Importantly, because of the increasing proportion of larvae developing through four instars with increasing temperature, larval traits associated with this pathway (reduced development time and juvenile dry weight) became more dominant. As a consequence of increasing growth rate with temperature, and the shift in the proportion of larvae developing through four instars, juvenile dry weight was greatest at intermediate temperatures (20°C). We conclude that at settlement P. varians juveniles do not follow the temperature-size rule; this is of importance for life-history ecology in response to environmental change, as well as for aquaculture applications.