Abstract. Monitoring networks aims at capturing the spatial and temporal variability of one or several environmental variables in a specific environment. The optimal placement of sensors in an ocean or coastal observatory should maximize the amount of collected information and minimize the development and operational costs for the whole monitoring network. In this study, the problem of the design and optimization of ocean monitoring networks is tackled throughout the implementation of data assimilation techniques in the Shallow water Hydrodynamic Finite Element Model (SHYFEM). Two data assimilation methods – Nudging and Ensemble Square Root Filter – have been applied and tested in the Lagoon of Venice (Italy), where an extensive water level monitoring network exists. A total of 29 tide gauge stations were available and the assimilation of the observations result in an improvement of the performance of the SHYFEM model that went from an initial root mean square error (RMSE) on the water level of 5.8 cm to a final value of about 2.1 and 3.2 cm for the two data assimilation methods, respectively. In the monitoring network optimization procedure, by excluding just one tide gauge at a time, and always the station that contributes less to the improvement of the RMSE, a minimum number of tide gauges can be found that still allow for a successful description of the water level variability. Both data assimilation methods allow identifying the number of stations and their distribution that correctly represent the state variable in the investigated system. However, the more advanced Ensemble Square Root Filter has the benefit of keeping a physically and mass conservative solution of the governing equations, which results in a better reproduction of the hydrodynamics over the whole system. In the case of the Lagoon of Venice, we found that, with the help of a process-based and observation-driven numerical model, two-thirds of the monitoring network can be dismissed. In this way, if some of the stations must be decommissioned due to a lack of funding, an a-priori choice can be made, and the importance of the single monitoring site can be evaluated. The developed procedure may also be applied to the continuous monitoring of other ocean variables, like sea temperature and salinity.