Nelson Lagoon is located on the far south coast of New South Wales. It is classed as a barrier river estuary and its entrance remains open to the ocean.
The estuary contains wetlands that are listed in the Directory of Important Wetlands in Australia for providing significant saltmarsh habitat.
The estuary has several small waterways, such as Duckhole Bay and Sandfly Bay. The main tributary to the lagoon is Nelson Creek.
The lagoon is located within Mimosa Rocks National Park and is a popular for swimming, fishing and birdwatching.