A new set of equations of motion for wave propagation in water with varying depth is derived in this study. The equations expressed by the velocity potentials and the wave surface elevations include first-order non-linearity of waves and have the same dispersion characteristic to the extended Boussinesq equations. Compared to the extended Boussinesq equations, the equations have only two unknown scalars and do not contain spatial derivatives with an order higher than 2. The wave equations are solved by a finite element method. Fourth-order predictor-corrector method is applied in the time integration and a damping layer is applied at the open boundary for absorbing the outgoing waves. The model is applied to several examples of wave propagation in variable water depth. The computational results are compared with experimental data and other numerical results available in literature. The comparison demonstrates that the new form of the equations is capable of calculating wave transformation from relative deep water to shallow water. (C) 2004 Elsevier Ltd. All rights reserved.