Hypnea musciformis is common on calm intertidal and shallow subtidal reef flats, tidepools and on rocky intertidal benches. Most often found low intertidal to shallow subtidal reef flats, attached to sandy flat rocks, or frequently epiphytic on Sargassum and other algae. In bloom stage, may be found free-floating.

Hypnea musciformis is an extremely abundant alga that is commercially cultivated throughout its world distribution as a food source and for its kappa carrageenan. This alga was purposefully introduced to Kane‘ohe Bay in 1974 from Florida for mariculture. This introduced invasive spread quickly, reaching other islands by 1982. The success of this alga in Hawai‘i is likely due to a rapid growth rate, ability to epiphytize other algae and easy fragmentation. Drifting fragments reattach to other algae, especially Sargassum, which can become detached during storms and float long distances, carrying the epiphytic H. musciformis with it. Dispersal may well have been enhanced via interisland travel with fouled boat hulls.

H. musciformis is often found in large, nearly unialgal mats, and during the winter can represent 2/3 of the biomass of drift algae on windward and leeward beaches on Maui. These mats are tossed ashore in windrows up to 1.5 feet and are considered an odiferous pest. In peak blooms, thousands of pounds wash up on Maui beaches.

Soon after its introduction, it was identified as a food source for the green sea turtle, Chelonia mydas. H. musciformis can make up a significant part the their diet, sometimes representing 99-100 percent of the seaweed mass found in their stomachs, but the actual nutritional value has not been determined.