This paper describes the design and control of a hovering AUV test-bed and analyzes the dynamic performance of the vehicle using simulation programs. The main purpose of this vehicle is to carry out fundamental tests of its station keeping, attitude control, and desired position tracking. Its configuration is similar to the general appearance of an ROV for underwater operations, and its dimensions are $0.75m{ imes}0.5m{ imes}0.5m$. It has four 450-W thrusters for longitudinal/lateral/vertical propulsion and is equipped with a pressure sensor for measuring the water depth and a magnetic compass for measuring its heading angle. The navigation of the vehicle is controlled by an onboard Pentium III-class computer, which runs with the help of the Windows XP operating system. This provides an appropriate environment for developing the various algorithms needed for developing and advancing a hovering AUV.