Coastal lagoons are enclosed water bodies that are connected to the sea by one or more inlet channels and generally their water depths are not deeper than a few meters. In this paper, a three dimensional baroclinic numerical model which simulates changes in water levels and velocity patterns in coastal lagoons induced by wind force, tidal force and density gradients and model applications are presented. The numerical model consists of hydrodynamic, transport and turbulence model components. The solution method is a composite finite difference-finite element method. Numerical model predictions are verified by analitical solution of steady wind driven circulatory flow in a closed basin with a flat bed, by results of an experimental study performed on wind driven turbulent flow in a homogeneous fluid and by the analitical solution of flow due to uni-nodal standing wave oscillation. Model is applied to Ölüdeniz Lagoon to simulate the wind and tide induced velocity patterns.