A small but expanding fishing village surrounded by beautiful beaches, bays and coastal lakes, NAROOMA lies at the heart of an area famous for its succulent mud oysters . You can canoe and windsurf on the Wagonga Inlet or sail to Montague Island - an offshore sanctuary for sea birds, seals and penguins. If you actually want to disembark at the island, you'll have to join a tour organized by the NPWS in Narooma (tours daily: winter 3.30pm; summer 6.30pm, though 9.30am tours are sometimes available; 3hr; $66; tel 02/4476 2888, fax 4476 2757), since it's a protected wildlife reserve. Southern right and humpback whales have begun to reappear in the bay between September and November, and tour operators also organize whale-watching tours in the event of any sightings; you can book at the Narooma Tourist Information Centre on the highway (daily 9am-5pm; tel 02/4476 2881 or free call 1800 240 003, www.naturecoast-tourism.com.au ). Non-landing cruises cost $45-55 for a two- to three-hour trip, including a visit to Montague Island to see the seal colonies. The visitors centre can also book you on a scenic cruise aboard the Wagonga Princess (tel 02/4476 2665) a century-old pine ferry which winds its way in and out of secluded bays on the river, stopping off for a guided rainforest walk and oyster-tasting session ($22 for a 3hr tour). Diving can be found off Montague Island all year, organized by Ocean Hut, 123 Princes Highway (tel 02/4476 2278), costing $55 for one dive and $65 for two (Jan-April grey nurse sharks and tropical fish; Aug-Dec mainly seal-spotting).

In Narooma there's a newly renovated YHA hostel , Bluewater Lodge , 8 Princes Highway (tel 02/4476 4440, fax 4476 5444, naroomayha@narooma.com ; rooms $35-50, dorms under $20). Accommodation is in well-equipped wooden cabins, surrounded on three sides by lakes and bay; there is also a very reasonable internet lounge, cheap bike and canoe rental and free fishing gear. Steve, the ever-helpful owner, will happily dispense advice and book local tours for his guests. Good motels and resorts include Forsters Bay Lodge Motel , Forsters Bay Road (tel & fax 02/4476 2319; $50-70); Tree Motel , 213 Princes Highway (tel 02/4476 4233; $70-90), which has air-conditioned suites, a pool and barbecue; and the beachside Island View Beach Resort , on the highway 3km south of town (tel 02/4476 4600 or free call 1800 641 590, www.islandview.com.au ; cabins $70 and upwards). Pub Hill Farm , Scenic Drive, 8km west of Narooma (tel 02/4476 3177, fax 4476 3153, pubhillfarm@sci.net.au ; $70-90), is a farm-style B&B which has four en-suite rooms (including one private, garden room with log fire - $90-115), and offers a baby-sitting service. The beautifully located Clark Bay Farm ( tel 02/4476 1640, amethyst@sci.net.au ; $70-150) offers disabled-access accommodation sleeping up to six, with electronically activated doors and beds.

Local favourites for dining include Restaurant at Lynch's on Princes Highway (tel 02/4476 3022), serving excellent contemporary Australian cuisine and local oysters; and the acclaimed fusion restaurant Iguana (tel 02/4476 3396), inopportunely located in the shopping plaza on the south side of town. There are several bistros at the Marina on Riverside Drive at Forsters Bay, including the award-winning Simply Seafood (lunch Tues-Sun, dinner Tues-Sat; tel 02/4476 2403), and the less pricey Quarterdeck next door. Rockwall Restaurant on Campbell Street has à la carte seafood specials, costing around $15 for main courses (closed Sun & Mon; tel 02/4476 2040). Casey's Cafe at the top of the town's hill, on the corner of Canty and Wagonga streets (tel 02/4476 1241) is a bright, cheery establishment, serving healthy, hearty food with many veggie options and the best coffee in town. For something more special, you could try the oyster bar overlooking Forsters Bay in the Narooma Oyster Supplies shop on Riverside Drive (tel 02/4476 1256).

Narooma's nightlife doesn't extend much beyond the vast Golf Club on Ballingalla Street (daily 10am-10pm), with pool tables and poker machines, serving the latest drink in town. If you're in need of a film fix, there is a delightfully preserved, National Trust classified Kinema picture theatre worth visiting - an original cinema from 1926 screening modern movies on Friday and Saturday evenings and Sunday matinees (daily showings except Mon during school holidays and the Dec/Jan holiday season).

A thriving local Koorie community run their own Umbarra Aboriginal Cultural Centre (tel 02/4473 7232, fax 4473 7169, umbarra@acr.net.au ) at Wallaga Lake , 25km south of Narooma. They operate daily tours to local sacred sites, including Gulaga (Mount Dromedary), with hands-on activities such as painting with ochres, building bark huts and sampling bush tucker and traditional medicine. (As some of their tours traverse Aboriginal lands, special permits are required for external visitors planning on visiting these areas independently.) They also have a cruise with commentary on Wallaga Lake, one of the largest saltwater lakes on the Australian coast. The lake's black duck is the sacred totem for the local indigenous people. Entry to the centre is free; activities and tours range from $6.25 to $45.