A navigational canal is planned to be constructed to link the Black Sea with the Marmara Sea in Istanbul, Turkey. This canal will be built beside an important freshwater lake, with a minimum distance of 1.0 km between them. This lake is an essential source of freshwater for the city of Istanbul. To evaluate the effects of canal construction on the freshwater aquifer between the lake and the canal, a 2D finite difference groundwater flow and solute transport model were developed to quantify the possible seepage flow and to simulate the spatial variations of the salinity distribution in the coastal aquifer, taking into consideration the transition zone between the freshwater and seawater bodies. The numerical model was calibrated by the average hydrologic conditions of 18 years of well records. Arc GIS was used to prepare the spatial datasets for the conceptual model in MODFLOW. The results indicated that, after canal implementation and the attaining of a steady state, 25% of the annual available water in the lake will be drained to the canal in terms of seepage. It was also found that the length of the seawater intrusion in the aquifer is strongly related to the hydraulic gradients, when the lake water level declines for 1 m above the mean sea level, for example, the length of the saltwater extends to halfway between Terkos Lake and Canal Istanbul.