The seasonal circulation in the Santa Barbara Channel (SBC) consists of a cyclonic eddy in the western basin and a poleward current along the northern coast. In this study the monthly mean circulation is simulated using a three-dimensional primitive-equation model with data assimilation included. The data are derived from the Santa Barbara Channel and Santa Maria Basin Coastal Circulation Study, covering an 8-month period from January to August 1994. The 6-hourly moored temperature observations in the upper 100 m water column are continuously assimilated into the model using a local correction method, although salinity and wind forcing are not explicitly included. Comparisons with the observations indicate that the model results generate realistic flow and temperature structures inside the SBC. The assimilation model faithfully reproduces the cyclonic eddy, but it fails to predict the currents at the exits of the channel. The issue of the data need is addressed through a sensitivity study. ¿ 1999 American Geophysical Union