A three-dimensional water quality model has been developed and applied to the Danshuei River estuarine system and adjacent coastal sea. The model considered various species of nitrogen, phosphorus, and silicon, organic carbon, phytoplankton, and zooplankton as well as dissolved oxygen and was driven by a three-dimensional hydrodynamic model. The hydrodynamic and water quality model was validated with observational tidal range, water surface elevation, velocity, salinity, and water quality state variables. According to the analyses of statistical error, predictions of hydrodynamic, salinity, dissolved oxygen, and nutrients from the model simulation quantitatively agreed with the observed data. Based on the validated model, model sensitivity analyses were conducted with sediment oxygen demand (SOD), benthic flux of ammonium nitrogen, and freshwater discharge at upstream boundaries. If SOD value increased 50%, the maximum rates for decreasing dissolved oxygen were 47.9% and 94.2% at the surface and bottom layers, respectively, in the Danshuei River-Tahan Stream. Model results showed that SOD had a significant impact on the distribution of dissolved oxygen concentration along the river. Low freshwater discharges at upstream boundaries resulted in lower dissolved oxygen concentration and higher nutrients in the Danshuei River estuarine system.