The water quality in an enclosed bay with the limited exchange of water between the ocean and bay is strongly affected by water stratification. Omura Bay in Japan is a highly enclosed bay with a very narrow entrance to the ocean and is an ideal bay to examine the water stratification and its effect on water quality. The characteristics of water and currents in Omura Bay can be divided into two regions. One is the bay mouth region where strong tidal currents cause vertical mixing all the year round. The other is the region of the center and end of the bay where strong stratification is formed in summer and anoxic water occurs in the bottom layer every summer. This occurrence of the anoxic water is related strongly to the thermocline in the bottom layer. The currents associated with the difference of the vertical structures of water density in the two regions influence the formation of stratification. When the stratification in the center and end of the bay is the strongest in July, the density of bottom water in this region becomes larger than that of the mixed water in the bay mouth region. The mixed water flows into the middle layer of the stratified region due to the similarity of the water density above the bottom layer. This inflow with limited vertical mixing causes the water in the center and end of the bay to outflow through the surface and bottom layers. The shear boundary between the inflow and outflow currents near the bottom layer reduces the bottom stratification very slowly. When the stratification becomes weak in August, the water in the bay mouth region flows into both the middle and bottom layers and the bottom thermocline disappears eventually. During this period from July to August, the retention time of water under the bottom thermocline becomes the longest. The amount of consumption of oxygen in the bottom water results in the formation of anoxic water due to no or litter supply of oxygen from the surrounding areas.