Wave-current interaction and its effects on the hydrodynamic environment in the Beibu Gulf (BG) have been investigated via employing the Coupled Ocean–Atmosphere–Wave–Sediment Transport (COAWST) modeling system. The model could simulate reasonable hydrodynamics in the BG when validated by various observations. Vigorous tidal currents refract the waves efficiently and make the seas off the west coast of Hainan Island be the hot spot where currents modulate the significant wave height dramatically. During summer, wave-enhanced bottom stress could weaken the near-shore component of the gulf-scale cyclonic-circulation in the BG remarkably, inducing two major corresponding adjustments: Model results reveal that the deep-layer cold water from the southern BG makes critical contribution to maintaining the cold-water mass in the northern BG Basin. However, the weakened background circulation leads to less cold water transported from the southern gulf to the northern gulf, which finally triggers a 0.2°C warming in the cold-water mass area; In the top areas of the BG, the suppressed background circulation reduces the transport of the diluted water to the central gulf. Therefore, more freshwater could be trapped locally, which then triggers lower sea surface salinity (SSS) in the near-field and higher SSS in the far-field.