The observing and forecasting conditions of coastal oceans in Alaska is technically challenging because of the mountainous terrain, the notoriously stormy seas, and a complex hydrological system of freshwater from rivers and glaciers. The Alaska Ocean Observing System and their partners developed a demonstration project over a 5-yr period in Prince William Sound. This location was chosen because of historical efforts to monitor ocean circulation following the Exxon Valdez oil spill of 1989. The primary goal is to develop a quasi-operational system that delivers weather and ocean information in near–real time to diverse user communities. This observing system now consists of a spatial array of atmospheric and oceanic sensors and a new generation of computer models to numerically simulate and forecast weather, waves, and ocean circulation. The project culminated in a 2009 field experiment that evaluated the performance of the model forecasts. Three ships, 44 surface drifters, an underwater glider, and an autonomous underwater vehicle, as well as two shore-based surface current radar systems, augmented the routine atmospheric and oceanographic measurements from weather stations and oceanographic buoys. Observations from terrestrial and moored weather stations were compared with atmospheric circulation forecasts, and wave gauges provided data that were used to evaluate the forecasts of significant wave heights and periods. The radar current mappers and drifter buoys validated the surface ocean circulation forecasts. Improved observations and forecasts of coastal oceans will benefit oil spill responders, commercial shippers that convey large amounts of freight to and from Alaska, and U.S. Coast Guard search-and-rescue operations.