Environmental deterioration around fish farms has been widespread in Japanese coastal areas. In order to prevent self-induced deterioration of the surrounding environment, the “Law to Ensure Sustainable Aquaculture Production” was enacted in 1999. Criteria based on three indicators, i.e., (1) dissolved oxygen content of water in fish cages, (2) acid volatile sulfide content (AVS-S) in the sediment and (3) the occurrence of macrofauna under the fish cages were determined to promote the “Aquaculture Ground Improvement Program” by applying this Law. The second criterion (AVS-S) is based on the assimilative capacity of the sediments to organic wastes from a fish farm. For applying this criterion to each farm, the maximum phase in the process of biological remineralization must be detected for a farm site when the benthic oxygen uptake (BOU) rates shows maximum. The peak of BOU, however, could not be determined during a survey in Gokasho Bay, suggesting a need for reexamination regarding the practical application of this criterion. In order to obtain data for refining the third criterion (macrofauna), a quantitative survey was conducted at 22 fish farms (red sea bream and yellowtail) along the Kumano-nada coast, central Japan. The biomass of the macrobenthos peaked in sediments containing 1.2 mg/g of total nitrogen, where the majority of aerobic mineralization of the loaded organic matter is supposed to occur. In summer, animals were scarcely found in sediments with AVS-S>1.7 mg/g, suggesting that this is a critical condition for the fish farm environment. An index embayment degree (ED), which represents the topographic conditions of a farm site, is proposed to discriminate artificial factors arising from fish farming activities from the natural factors related to the topography. Community parameters of the macrobenthos and environmental factors were significantly correlated with ED ( P<0.001). In shallow, semi-enclosed sites (larger ED values), environmental deterioration and decreases in the benthic biomass were more conspicuous in large-scale farms than in small-scale farms. Six assemblages of the macrobenthos were identified by cluster analysis and were classified into three groups, indicating conditions as healthy, cautionary and critical, respectively. As fish production increased, habitat of the assemblage in the cautionary zone shifted to the offshore, deeper areas (smaller ED values), indicating that both of aquacultural activities and topographic conditions affect the species composition. Macrofauna, sediment parameters and the index ED are concluded as useful to develop pragmatic guidelines for site selection of fish farms.