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This thesis has investigated the improvement of forecasting temperature in a coastal embayment through the assimilation of sea surface temperature (SST) observations. The research was prompted by the increasing pressures on the coastal marine environment. To better manage the environment, an improved understanding of its future state is necessary. Improving the forecasting of temperature advances our knowledge in this direction. Whilst assimilation of SST is routinely carried out for oceans, its use has been minimal in coastal regions, which is more complicated because of anisotropic covariances and a breakdown of geostrophy in the coastal region. Improvements in computing power, and the introduction of ensemble-based assimilation techniques have made the approach followed in this thesis possible. (For complete abstract open document)