The Eastern Canadian northern shrimp population, representing one of the most important fisheries in the region, decreased dramatically since the mid‐2000s to a historical low in 2017, but changes were not spatially uniform. Applying a biophysical model within Newfoundland and Labrador (NL) management areas, we investigated connectivity processes during the long pelagic larval phase (2–3 months) of Pandalus borealis and key drivers of larval dispersal in different environmental conditions. We selected 3 years representative of contrasting North Atlantic Oscillation (NAO) phases to assess potential larval dispersal patterns of the northern shrimp population in NL, and hierarchically assessed the impact of the timing of release (yearly and daily), release location, and vertical migration behaviour on shrimp larval dispersal. Overall, we found that populations located on the northern Newfoundland and Labrador shelf supplied potential settlers to southern populations because of the dominant Labrador Current. Ocean circulation and current velocities during the NAO positive year differed from other years, generating contrasting settlement spatial patterns. Larval release location and vertical migration behaviour were the two most important influences on the strength of larval supply and settlement patterns. Inclusion of diel and ontogenic swimming behaviour increased settlement success of larvae released from inshore areas, regardless of study years. Our study improves understanding of northern shrimp stock‐recruitment relationships, their sensitivity to changing environmental conditions, and spatially non‐homogeneous population decline for bentho‐pelagic species with a long larval phase, which could potentially help improve management strategies.