Shallow waterbodies are often assumed to be well mixed in the vertical. However, when they are characterised by high turbidity levels, absoption of solar heating within a relatively thin surface layer can produce thermal stratification. Results from an intensive monitoring program have been combined with three-dimensional circulation modelling to examine the diurnal stratification cycles in a small turbid waterbody. The waterbody, known as Rushy Billabong, is located in southeastern Australia and its high turbidity coupled with forcing by wind and solar radiation resulted in regular diurnal cycles of stratification and overturning. Under conditions of light wind and high solar radiation, the model results were generally consistent with the observed temperature field. However, under stronger winds, preferential cooling and sinking of shallow water around the edge of the lake began to contribute significantly to the interior stratification. Model estimates then became more sensitive to the detailed bathymetry and the choice of turbulence parameterisation. The level of stratification is also shown to influence the circulation in the billabong by trapping the wind-driven flow near the surface. Insights provided by the observations and modelling may have broader implications for the management of small turbid systems such as settling ponds, aquaculture ponds, and some natural wetlands.