Evolution of the wave field in a coastal bay is investigated, by comparison between field observations and numerical simulations using a spectral wave model (Simulating WAves Nearshore (SWAN)). The simulations were conducted for the passage of an extratropical storm, during which surface elevation spectra were bimodal owing to local wind-sea generation and swell propagation into the bay. SWAN was run in stationary and nonstationary mode for two whitecapping source term formulations. The first was developed by Komen et al. (1984) and is dependent on spectrally averaged wave steepness, and thus includes swell in the calculation of whitecapping dissipation and typically overestimates wind sea in the presence of swell. The second, proposed by van der Westhuysen et al. (2007), estimates whitecapping of wind sea locally in the wave spectrum and is not coupled to swell energy. This formulation reproduced the magnitude and shape of the observed wind-sea spectral peak much better than the previous formulation. Whitecapping dissipation rates have been estimated from observations, using the equilibrium range theory developed by Phillips (1985), and are well correlated with both wind speed and acoustic backscatter observations. These rates agree with SWAN estimates using the spectrally local expression, and provide additional physical validation for the whitecapping source term.