P. nigrescens is primarily found within soft, pliable rocks or in dead coral rubble as depicted in the video below (Rice, 1970). It prefers to find pre-existing crevices to seek shelter in, but has also been observed to bore into dead coral contributing to bioeriosion of coral reefs (Cutler 1968). Sipunculids were described as the dominant bioerosive force of nonliving reef of Moorea, French Polynesia, and it may be assumed P. nigrescens has some bioerosive influence at the Great Barrier reef (Peyrot-Clausade et al., 1992). Coral boring species bore into coral by rapidly lowering the pH of the waters surrounding the coral skeleton, and using physical abrasion with epidermal papillae to remove the corallite wall crystals (Williams & Margolis, 1974). In this way, rock sediment and calcareous coral skeletons, along with particulate food (algae, detritus, feces) are transformed into biomass. This metabolic energy can then be transferred to higher trophic levels. Common predators of P. nigrescens include large gastropods, fish, cephalopods, crabs and people. Many Phascolosoma species are considered Chinese delicacies (Chen & Yeh, 1958). There have been reports of intestinal parasites inside P. nigrescens, namely the larval worm Cleosiphon (Jones & Schiess, 1975). P. nigrescens, along with most identified sipunculans, requires fully saline water to survive (Cutler, 1994). Individuals collected were not observed to survive well under the laboratory conditions at The University of Queensland. 

Individuals recovered from coral rubble from the intertidal headlands of New South Whales were removed from their burrows, and placed in a plastic tank with fine sedimented sand and a coral fragment in order to observe their behaviour. After 30 minutes of observation, no individuals observed reached the coral rubble when placed 150cm away, or when placed 75cm away. This lead to the inference that sipunculids have extremely limited mobility; this is further explored in the Musculature & Movement section. When placed directly on the coral fragment, all individuals either infiltrated a previously existing crevice, or sought shelter underneath the fragment within 5 minutes of being introduced. It is inferred that it is in the adult's best energetic interests to insert themselves into pre-existing crevices and cracks rather than expend the energetic, and chemical resources involved in burrowing.