Tidal stream energy is one of most promising resources of marine renewable energy, and it has attracted more and more attention in the recent years. Hulu Island which is located at Zhoushan, China is with a maximal current velocity more than 2.0 m/s, showing a great potential in utilization of tidal stream energy. Meanwhile, a demonstration project for exploiting tidal stream energy, supported by the State Oceanic Administration, People's Republic of China, is planned in this coastal area. This study develops a two-dimensional mathematical model for the simulation of tidal hydrodynamics and potential assessment of tidal stream energy around Hulu Island. The numerical results of tidal elevation and current velocity are compared with those data from field observations (one for water level and two for tidal current), and the good agreement between simulation and measurement indicates a great ability of the model. Distributions of mean and maximal energy densities of tidal stream in the vicinity of Hulu Island are provided, and two possible sites for deploying tidal stream turbines are recommended. At each possible site, velocity profile and power density curve are numerically investigated for a 15-day period for covering the spring-neap tide cycle. The results show the candidate site P1 and P2 hold the mean power density as 0.62 kW/m2 and 1.81 kW/m2, respectively.