Abstract: A three-dimensional hydrodynamic model of the Liaodong Bay was developed in the frame of Environmental Fluid Dynamics Code (EFDC) to study the effects of the artificial island layout on hydrodynamics and water exchange in the coastal waters. The results show that the island blocks water flow and the width of its upstream face is the most significant factor of the blocking effect. An island with a larger width has a greater blocking effect and forms a larger area of low-velocity flow, thereby resulting in a lower capacity of water exchange in the study area. Complexity of island shoreline is also a considerable factor of the flow hydrodynamics: A zigzag shoreline is easier to form a semi-enclosed area of very low flow and poor conditions of water exchange. We compared the blocking effects and flow velocities in the water region near the island in tidal flows of different intensities and found out that the impact of the island much depended on tidal intensity. The capacity of water exchange is described and compared using two parameters: half-life time and volume-exchange rate. The latter is found better describing the differences in water exchange produced by different island layouts.