A three-dimensional ocean circulation model is used to study the barotropic tidal circulation and nonlinear tidal dynamics in Lunenburg Bay, Nova Scotia. The model performance is first assessed using the observed bottom pressures and currents made in Septembers of 1991 and 2003. The model results reproduce reasonably well the observed tidal circulation in the study region. The simulated tidal circulation is dominated by the semidiurnal (M2) tide and an intense jet-like flow through a narrow channel connecting Lunenburg Bay and two shallow coves. To demonstrate the importance of nonlinear tidal dynamics in the region, the first two harmonics of M2 (i.e., M4 and M6) are computed from the model results forced by the M2 tide at the model open boundaries. Both M4 and M6 are relatively large in western Lunenburg Bay and vicinity, indicating the importance of the nonlinear tidal dynamics over these areas. To quantify the role of various nonlinear terms in generating the intense jet and associated residual flows in the region of the jet, both transient and tidally averaged (time mean) momentum equations are examined. The transient and time mean momentum balances demonstrate that the nonlinear interaction of the tidal currents with local bathymetry is balanced primarily by the horizontal pressure gradients, momentum advection, and dissipation. The Coriolis effect plays a minor role in the study region.