Delta smelt (Hypomesus transpacificus) is a critically endangered species endemic to the San Francisco Bay Delta (SFBD). Important for the conservation of this species is understanding the physiological and ecological impacts contributing to their population decline, and current studies lack information on embryonic development. Changes in patterns of salinity across the SFBD may be a particularly important environmental stressor contributing to the recruitment and survival of the species. Throughout their ontogeny, delta smelt may exhibit unique requirements and tolerances to environmental conditions including salinity. Here, we describe 22 stages of embryonic development of H. transpacificus that characterize early differentiation from the fertilized egg until hatching, allowing the identification of critical morphological features unique to this species. Additionally, we investigated aspects of physiological tolerance to environmental salinity during development. Embryos survived incubation at salinity treatments between 0.4 and 20 ppt, yet had lower hatch success at higher salinities. Prior to hatching, embryos exposed to higher salinities had increased osmolalities and reduced fractions of yolk implying that the elevated external salinity altered the physiology of the embryo and the environment internal to the chorion. Lastly, egg activation and fertilization appear to also be impacted by salinity. Altogether, we suggest that any potential tolerance to salinity during embryogenesis, a common feature in euryhaline teleost species, impacts life cycle transitions into, and out of, embryonic development. Results from this investigation should improve conservation and management practices of this species and further expand our understanding of the intimate relationship between an embryo and its environment.