Ocean waves play an important role in processes that govern the fluxes across the air‐sea interface and in the upper‐ocean mixing. Equations for current and heat are presented that include effects of ocean waves on the evolution of the properties of the upper ocean circulation and heat budget. The turbulent transport is modeled by means of the level‐2 Mellor‐Yamada scheme, which includes an equation for the production and destruction of Turbulent Kinetic Energy (TKE). The TKE equation in this work includes production due to wave breaking, production due to wave‐induced turbulence and/or Langmuir turbulence, effects of buoyancy and turbulent dissipation. As a first test, the model is applied to the simulation of the daily cycle in SST at one location in the Arabian sea for the period of October 1994 until October 1995. For this location, the layer where the turbulent mixing occurs, sometimes called the Turbocline, is only a few meters thick and fairly thin layers are needed to give a proper representation of the diurnal cycle. The dominant processes that control the diurnal cycle turn out to be buoyancy production and turbulent production by wave breaking, while in the deeper layers of the ocean the Stokes‐Coriolis force plays an important role.