The recent post-Glacial Mediterranean sea-level rise converted mountain valleys to islandic embayments. These bays exhibit distinct hydrographic and biogeochemical characteristics, seasonally alternating thermohaline functioning and their coastal ecosystems support thriving coastal activities. The Kalloni Gulf, Lesvos island, Greece, constitutes a textbook example of the above type of embayments and -due to its proximity to the facilities of the University of the Aegean in the island’s capital, Mytilene- has become the focal point of the development of the prototype Coastal Environmental Observatory “AEGIS”. This laboratory has risen as the culmination of decade-long efforts of three Research Laboratories of the Department of Marine Sciences and includes both observational and forecasting components. The latter component comprises three levels of numerical modeling of the ocean circulation: The low-resolution (level 1) domain corresponds to the Central and North Aegean Sea, the intermediate domain (level 2) corresponds to the marine area surrounding Lesvos island, and the high-resolution model domains (level 3) refer to the three major islandic bays of the North Aegean Sea, i.e. the Kalloni and Gera Gulfs in Lesvos and Moudros Gulf in Lemnos island. The Regional Ocean Modeling System (ROMS) is used for simulating ocean circulation at level (1) and (2) models, while at the high-resolution domains the numerical model Delft3D-Flow is used. The model SWAN is used at all domains to simulate the wind-wave fields, while the biogeochemical model Delft3D-WAQ has been applied preoperationally on Kalloni Gulf. State-of-the art data assimilation is employed by the level 1 circulation model to minimize forecasting errors, using both field and remote observations. For validation and tuning of the level 3 models in the Gulf of Kalloni a coastal monitoring platform anchored in the middle of the Gulf provide meteorological, hydrographic and biochemical observations.