Stable carbon isotope ratios (δ¹³C) and C/N atomic ratio {(C/N)_a} were used to investigate the sources and fate of organic matter in Khung Krabaen Bay, Thailand (KKB) and to assess the effect of shrimp pond effluent on the KKB system. Five major sources (mangroves, seagrass, algae, plankton, and shrimp feeds) contributing organic matter into waters and sediments were identified. Statistically significant differences between the δ¹³C values and (C/N)_a of mangrove leaves (δ¹³C ∼ −29‰ (C/N)_a ∼ 40–105), seagrass (δ¹³C ∼ −11‰ (C/N)_a ∼ 19), and algae (δ¹³C ∼ −16‰ (C/N)_a ∼ 18) were found, while plankton (δ¹³C ∼ −21‰ (C/N)_a ∼ 5–6) and shrimp feeds (δ¹³C ∼ −23‰ (C/N)_a ∼ 7) had similar values. The most negative δ¹³C values of particulate organic matter (POM) and sediments in the mangrove area indicated that mangroves were the major sources of organic matter in this area. The δ¹³C levels in POM and in sediments found in the canals indicated that the organic matter was predominantly of mangrove origin rather than from shrimp-pond effluent. High nitrogen content in mangrove leaves and in sediments, and the low nutrient concentrations in the bay waters, suggested that the KKB system was not affected by shrimp-pond effluent during the sampling period. These results showed that mangroves were probably effective in trapping nutrients from shrimp-pond effluent. In the inner bay area, sources of POM were a mixture of seagrass, algae, and plankton, while sediments contained a strong signature from seagrass and algae. Plankton represent a major source contributing organic matter to POM and sediment in the offshore area. Our results showed that the δ¹³C value was a good tracer in identifying sources and fate of organic matter. On the other hand, the (C/N)_a was less reliable in identifying organic matter sources because the original sources in POM and, particularly, sediment may be lost or masked by biochemical alteration. However, the combined analysis of δ¹³C and (C/N)_a provided substantially more information regarding the source and fate of organic matter in the KKB system than could be achieved by using one tracer alone.