In August 2009, Typhoon Morakot caused massive flooding and devastating mudslides in the southern Taiwan triggered by extremely heavy rainfall (2777. mm in 4 days) which occurred during its passage. It was one of the deadliest typhoons that have ever attacked Taiwan in recent years. In this study, numerical simulations are performed for the storm surge and ocean surface waves, together with dynamic meteorological fields such as wind, pressure and precipitation induced by Typhoon Morakot, using an atmosphere-waves-ocean integrated modelling system. The wave-induced dissipation stress from breaking waves, whitecapping and depth-induced wave breaking, is parameterized and included in the wave-current interaction process, in addition to its influence on the storm surge level in shallow water along the coast of Taiwan. The simulated wind and pressure field captures the characteristics of the observed meteorological field. The spatial distribution of the accumulated rainfall within 4 days, from 00:00 UTC 6 August to 00:00 UTC 10 August 2009, shows similar patterns as the observed values. The 4-day accumulated rainfall of 2777. mm at the A-Li Shan mountain weather station for the same period depicted a high correlation with the observed value of 2780. mm/4 days. The effects of wave-induced dissipation stress in the wave-current interaction resulted in increased surge heights on the relatively shallow western coast of Taiwan, where the bottom slope of the bathymetry ranges from mild to moderate. The results also show that wave-breaking has to be considered for accurate storm surge prediction along the east coast of Taiwan over the narrow bank of surf zone with a high horizontal resolution of the model domain. © 2012 Elsevier B.V.