Since the early 1980s excessive discharges of organic waste into Tolo Harbour have created serious problems through nutrient enrichment. A number of eutrophication related problems have been reported which incurred financial losses of billions of dollars and serious ecological imbalance. This work addresses the development, verification and application of a water quality model to synthesize the available large database of water quality and to study water quality management issues of Tolo Harbour. Since detrimental water quality problems usually occur during summer when there is stratification and the water temperature is high, the tidally-averaged hydrodynamics and the relative contribution of gravitational circulation and tidal exchanges in Tolo Harbour have been studied. Gravitational circulation is found to be the dominant mixing process for most of the year, accounting for 70 percent of the mixing. A simple and tractable predictive two-layer mass transport and diagenetic dynamic eutrophication model has been developed. The model computes daily variation of key water quality variables in the water column: algal biomass, dissolved oxygen, organic-nitrogen, ammonium-nitrogen, nitrate-nitrogen, and carboneous oxygen demand. In addition, to study the response and impact of the seabed to the overall eutrophication process a sediment sub-model is developed. The diagenetic sediment sub-model computes explicitly the amount of nutrient recycled and the sediment oxygen demand exerted on the water column. The calibrated model has been validated against a 20 year water quality data base under a wide range of hydro-meteorological and environmental conditions. Both spatial and seasonal variation of observed water quality variables are reproduced. The verified model shows that a significant reduction of total nitrogen loading would be required to meet the water quality objectives, with a recovery time of three months for water column and more than two years for sediment.