The generation, propagation, and dissipation processes of large-amplitude nonlinear internal waves in Massachusetts Bay during the stratified season were examined using the nonhydrostatic Finite-Volume Coastal Ocean Model (FVCOM-NH). The model reproduced well the characteristics of the high-frequency internal waves observed in Massachusetts Bay in August 1998. The model experiments suggested that internal waves over Stellwagen Bank are generated by the interaction of tidal currents with steep bottom topography through a process of forming a large-density front on the western slope of the bank by the release of an initial density perturbation near ebb-flood transition, nonlinear steepening of the density front into a deep density depression, and disintegrating of the density depression into a wave train. Earth's rotation tends to transfer the cross-bank tidal kinetic energy into the along-bank direction and thus reduces the intensity of the density perturbation at ebb-flood transition and density depression in the flood period. The internal wave packet propagates as a leading edge feature of the internal tidal wave, and the faster propagation speed of the high-frequency internal waves in Massachusetts Bay is caused by Earth's rotation. The model experiments suggested that bottom friction can significantly influence the cross-bank scale of the density perturbation and thus the density depression during wave generation and the dissipation during the wave's shoaling. Inclusion of vertical mixing using the Mellor-Yamada level 2.5 turbulence closure model had only a marginal effect on wave evolution. The model results support the internal wave theory proposed by Lee and Beardsley (1974) but are in disagreement with the lee-wave mechanism proposed by Maxworthy (1979).