Mistaken Island is a small granite island in the south-western corner of King George Sound, only about 120 m off the Vancouver Peninsula and about 5 km from Albany's town centre. It is a 12-hectare class A nature reserve, declared in 1971, and home to a colony of little penguins whose burrows early settlers mistook for rabbit holes – hence both its name and its alternative name, Rabbit Island. In the 19th century the island was also used by shore-based whalers.

Underwater, Marine Life Network describes rocky reefs in 5-12 m, best on the deeper southern side, with sponge gardens, small fish and invertebrates. The granite is broken into boulders and ledges, with sponges, ascidians and encrusting algae on the rock and kelp and seagrass in the shallows. Small reef fish such as western blue devils, scalyfin, wrasse and old wives are common, and at dusk little penguins may be seen swimming around the island.

The nearby waters are licensed for mussel culture on long-lines, which adds plankton and can reduce visibility, but also attracts fish. The site is close to the town ramp and sheltered from most weather, making it a convenient shallow dive for local divers with their own boat, a snorkel on calm days, or a fallback when the outer sites are rough. It is not a destination dive, and visiting divers with limited time will get more from the HMAS Perth, Michaelmas and Breaksea sites, but it is a pleasant, easy reef with a genuine wildlife point of interest.

Albany is 418 km (about 4.5 hours) south-east of Perth via Albany Highway. Charter boats and private boats launch either from the Emu Point boat ramp (Emu Point Drive, 7 km north-east of the CBD, with a large trailer car park, toilets and a fish-cleaning station) or from the town ramp beside the Albany Waterfront marina in Princess Royal Harbour, which exits into King George Sound through the harbour entrance past Possession Point. Mistaken Island lies about 120 m off the northern shore of Vancouver Peninsula, roughly 5 km south-east of the CBD and only 10 minutes by boat from the Princess Royal Harbour ramp through the harbour entrance.

Anchor on sand off the southern (deeper) side, keeping well clear of the licensed mussel long-lines in the adjacent waters. Landing on the island is prohibited (nature reserve).

King George Sound is sheltered from the Southern Ocean by Flinders Peninsula, Bald Head and Breaksea and Michaelmas Islands, which is why Albany can offer diving on days when the open coast is wild. Mistaken Island sits close to Vancouver Peninsula in the south-western corner of the sound, so it is sheltered from ocean swell and from southerly and westerly winds. Strong north-easterly and easterly winds blow across the sound onto its northern side, so dive the southern side then.

Visibility is lower than on the outer islands (often 6-12 m) because of harbour outflow and mussel-farm plankton, and drops after rain.

Anchor on the southern side, descend to the reef edge at about 10-12 m and follow the rocky reef with the island on one shoulder, looking into sponge gardens, then return shallower at 5-6 m. Keep away from mussel lines and do not approach the shore.

No regular scheduled trips; occasionally used by South Coast Diving Supplies and local club divers as a sheltered shallow dive.