Jinhae Bay once was a productive area of fisheries. It is, however, now notorious for its red tides; and oxygen deficient water-masses extensively develop at present in summer. Therefore the shellfish production of the bay has been decreasing and mass mortality often occurs. Under these circumstances, the three-dimensional numerical hydrodynamic and the material cycle models, which were developed by the Institute for Resources and Environment of Japan, were applied to analyze the processes affecting the oxygen depletion and also to evaluate the environment capacity for the reception of pollutant loads without dissolved oxygen depletion. In field surveys, oxygen deficient water-masses were formed with concentrations of below 2.0mg/l at the bottom layer in Masan Bay and the western part of Jinhae Bay during the summer. Current directions, computed by the $M_2$ constituent, were mainly toward the western part of Jinhae Bay during flood flows and in opposite directions during ebb flows. Tidal currents velocities during the ebb tide were stronger than that of the flood tide. The comparision between the simulated and observed tidal ellipses showed fairly good agreement. The residual currents, which were obtained by averaging the simulated tidal currents over 1 tidal cycle, showed the presence of counterclockwise eddies in the central part of Jinhae Bay. Density driven currents were generated southward at surface and northward at the bottom in Masan Bay and Jindong Bay, where the fresh water of rivers entered. The material cycle model was calibrated with the data surveyed in the field of the study area from June to July, 1992. The calibrated results are in fairly good agreement with measured values within relative error of $28\%$. The simulated dissolved oxygen distributions of bottom layer were relatively high with the concentration of $6.0{sim}8.0mg/l$ at the boundaries, but an oxygen deficient water-masses were formed within the concentration of 2.0mg/l at the inner part of Masan Bay and the western part of Jinhae Bay. The results of sensitivity analyses showed that sediment oxygen demand(SOD) was one of the most important influence on the formation of oxygen depletion. Therefore, to control the oxygen deficient water-masses and to conserve the coastal environment, it is an effective method to reduce the SOD by improving the polluted sediment. As the results of simulations, in Masan Bay, oxygen deficient water-masses recovered to 5.0mg/l when the $50\%$ reduction in input COD loads from Masan basin and $70\%$ reduction in SOD was conducted. In the western part of Jinhae Bay, oxygen deficient water-masses recovered to 5.0mg/l when the $95\%$ reduction in SOD and $90\%$ reduction in culturing ground fecal loads was conducted.