A three-dimensional hydrodynamic and water quality model was developed for Erhai Lake based on the Environmental Fluid Dynamic Code (EFDC). A continuous 10-year simulation of water quality conditions in Erhai Lake was conducted with the model for the period from 2001 to 2010. The simulated results were in good agreement with observed data, indicating that the model simulation results were accurate and reasonable. The hydrodynamic and water quality model was used to analyze the seasonal and spatial changes of lake current circulation, water level variation and water quality condition. The dynamic environmental capacity of the lake was then determined based on the modeling results for main water quality constituents. The assimilative capacity of the lake was determined to be 1 150, 72, 12 780 and 10 093 tons per year for TN, TP, COD_Mn and BOD₅, respectively, with respect to the Class II national surface water quality standards. The three-dimensional hydrodynamic and water quality model developed for Erhai Lake provides an important technological platform for protection of Erhai Lake water quality, and is instrumental for developing regulation and management strategies for water pollution control of the Erhai Lake watershed.