The high market demand for baby lobster (Panulirus spp.) so far has been only met by natural catches. On the other hand, the recruitment rate for the lobster seeds in nature is very small (<0.1%). To prevent this from happening, a breakthrough in lobster hatchery technology must be developed immediately. A starting point to develop a lobster hatchery is to know the natural habitat of lobster peurulii and imitate it to provide a suitable environment for their indoor culture. Therefore, this research aimed at investigating the natural habitat of spiny lobster at one of the most common fishing grounds for spiny lobster in East Java, which is Kili-Kili Bay, Karang Gongso, Trenggalek Regency. The measured parameters were mostly focused on physical characteristics including the substrate, DO, transparency, dissolved oxygen salinity, temperature and depth in the waters. The results showed Kili-Lili Bay had in general 18-25 m depth, the salinity of 30-35 ppt, temperature 27-29°C, dissolved oxygen of 5-6.7 and transparency of 5-6,5 m, and sandy substrate. These results can be used as preliminary knowledge to build an artificial environment for lobster hatchery indoors.