To better understand large-scale interactions between fresh and saline groundwater beneath an Atlantic coastal estuary, an offshore drilling and sampling study was performed in a large barrier-bounded lagoon, Chincoteague Bay, Maryland, USA. Groundwater that was significantly fresher than overlying bay water was found in shallow plumes up to 8 m thick extending more than 1700 m offshore. Groundwater saltier than bay surface water was found locally beneath the lagoon and the barrier island, indicating recharge by saline water concentrated by evaporation prior to infiltration. Steep salinity and nutrient gradients occur within a few meters of the sediment surface in most locations studied, with buried peats and estuarine muds acting as confining units. Groundwater ages were generally more than 50 years in both fresh and brackish waters as deep as 23 m below the bay bottom. Water chemistry and isotopic data indicate that freshened plumes beneath the estuary are mixtures of water originally recharged on land and varying amounts of estuarine surface water that circulated through the bay floor, possibly at some distance from the sampling location. Ammonium is the dominant fixed nitrogen species in saline groundwater beneath the estuary at the locations sampled. Isotopic and dissolved-gas data from one location indicate that denitrification within the subsurface flow system removed terrestrial nitrate from fresh groundwater prior to discharge along the western side of the estuary. Similar situations, with one or more shallow semi-confined flow systems where groundwater geochemistry is strongly influenced by circulation of surface estuary water through organic-rich sediments, may be common on the Atlantic margin and elsewhere.