This study analyzes the dissolved oxygen (DO) depletion or hypoxia formation affecting the ecological vulnerability of Gyeongin-Ara Waterway (GAW), an artificial estuarine waterway. The physical, chemical, and biochemical factors affecting the summer hypoxia dynamics and distribution are simulated and the habitat volumes of major fish species are calculated. CE-QUAL-W2, a two-dimensional hydrodynamic and water quality model, is applied for the simulation. Comparison with observation reveals that the salinity stratification, vertical DO gradient, and summer hypoxia characteristics are realistically reproduced by the model. Comprehensive analysis of the spatial distributions of the residence time, salinity, and DO concentration reveal that the residence time is longest at the bottom of a freshwater inflow zone. Accordingly, residence time is identified as the physical factor having the greatest influence on hypoxia. It is also clear that a hypoxic water mass diffuses towards the entire waterway during neap tides and summer, when the seawater inflow decreases. Based on the modeling results, the DO depletion drivers are identified and the hypoxic zone formation and distribution are sufficiently explained. Finally, fish habitat volumes are calculated. In particular, the survival habitat volume of Mugil cephalus is found to decrease by 32–34% as a result of hypoxia from July to August. The model employed in this study could be utilized to establish an operational plan for the waterway, which would increase fish habitat volumes.