The circulation and mesoscale eddies in the Persian Gulf are investigated using results from a high-resolution (similar to 1 km) Hybrid Coordinate Ocean Model (HYCOM). The circulation in the Persian Gulf is composed of two spatial scales: basin scale and mesoscale. The progression of a cyclonic circulation cell dominates the basin-scale circulation in the eastern half of the gulf (52 degrees-55 degrees E) during March-July. This is primarily the consequence of density-driven outflow-inflow through the Strait of Hormuz and strong stratification. A northwestward-flowing Iranian Coastal Current (ICC; 30-40 cm s(-1)) between the Strait of Hormuz and north of Qatar (similar to 52 degrees E) forms the northern flank of the cell. Between July and August the ICC becomes unstable because of the baroclinic instability mechanism by releasing the potential energy stored in the cross-shelf density gradient. As a result, the meanders in the ICC evolve into a series of mesoscale eddies, which is denoted as the Iranian coastal eddies (ICE). The ICE have a diameter of about 115-130 km and extend vertically over most of the water column. Three cyclonic eddies produced by the model during August-September 2005 compared quite well with the Moderate Resolution Imaging Spectroradiometer (MODIS) SST and chlorophyll-a observations. The remnants of ICE are seen until November, after which they dissipate as the winter cooling causes the thermocline to collapse.