Seagrass beds cover about 0.15% of the global ocean and contribute 1% of the net primary production of the ocean. They are important nursery habitats for economic fishes and invertebrates such as red drum (Sciaenops ocellatus), Atlantic cod (Gadus morhua), queen conch (Strombus gigas), and blue crab (Callinectes sapidus). The nursery function of seagrass beds has been widely recognized because the biomass and density of juvenile fishes and invertebrates in seagrass beds are higher than in other habitats along the coast. We systematically reviewed the literature on the nursery function of seagrass beds. We evaluated the seagrass nursery function based on the juveniles' density, growth rate, survival rate, and migration to adult habitats. The factors of food availability and predation risk were also summarized to explain the mechanism of nursery function. High density of juvenile organisms was the identifying factor of the nursery function of seagrass beds, and many juveniles in the seagrass beds showed high growth and survival rates, and migrated to adult habitats during juvenile ontogeny. Primarily, abundant food or lower predation pressure seemed to enable the seagrass nursery function. Seagrass leaves, epiphytes, and phytoplankton assemblages, which served as important food sources for many herbivorous juveniles, were abundant in seagrass ecosystems. In addition, some smaller macrofauna such as copepods, amphipods, and polychaetes showed high densities in the seagrass beds. Predator abundance, structural heterogeneity, and turbidity in seagrass beds contributed either directly or indirectly to predation risk. These mechanisms were not mutually exclusive in that high structural complexity in seagrass beds could provide more living space, higher food sources, and a reduction in predation risk for juveniles. However, different juvenile species inhabited the seagrass ecosystems for different purposes, and the mechanisms of seagrass nursery function also varied with different environmental conditions. Finally, future research directions of seagrass nursery function are indicated: (1) to quantify the contribution of migration of individuals from seagrass bed to adult habitats; (2) to clarify the impact of global climate change and human activities on the nursery function of seagrass beds; and (3) to investigate the response of nursery function to the "patch effect" and "edge effect" of seagrass beds. We believe that this study provides scientific perspectives for protecting the seagrass ecosystem in China.