Wave propagation in a three-dimensional (3D) fully nonlinear numerical wave tank (NWT) is studied based on velocity potential theory. The governing Laplace equation with fully nonlinear boundary conditions on the moving free surface is solved using the indirect desingularized boundary integral equation method (DBIEM). The fourth-order predictor-corrector Adams-Bashforth-Moulton scheme (ABM4) and mixed Eulerian-Lagrangian (MEL) method are used for the time-stepping integration of the free surface boundary conditions. A smoothing algorithm, B-spline, is applied to eliminate the possible saw-tooth instabilities. The artificial wave speed employed in MTF (multi-transmitting formula) approach is investigated for fully nonlinear wave problem. The numerical results from incorporating the damping zone (DZ), MTF and MTF coupled DZ (MTF+DZ) methods as radiation condition are compared with analytical solution. An effective MTF+DZ method is finally adopted to simulate the 3D linear wave, second-order wave and irregular wave propagation. It is shown that the MTF+DZ method can be used for simulating fully nonlinear wave propagation very efficiently.