The Bay of Fundy in eastern Canada has the highest tides in the world. Harnessing the tidal energy in the region has long been considered. In this study, the effects of tidal in-stream energy extraction in the Minas Passage on the three-dimensional (3D) tidal circulation in the Bay of Fundy (BoF) and the Gulf of Maine (GoM) are examined using a nested-grid coastal ocean circulation model based on the Princeton Ocean Model (POM). The nested-grid model consists of a coarse-resolution (similar to 4.5 km) parent sub-model for the GoM and a high-resolution (similar to 1.5 km) child sub-model for the BoF. The tidal in-stream energy extraction in the model is parameterized in terms of nonlinear Rayleigh friction in the momentum equation. A suite of numerical experiments are conducted to determine the ranges of extractable tidal in-stream energy and resulting effects on the 3D tidal circulation over the Bay of Fundy and the Gulf of Maine (BoF-GoM) in terms of the Rayleigh friction coefficients. The 3D model results suggest that the maximum energy extraction in the Minas Passage increases tidal elevations and tidal currents throughout the GoM and reduces tidal elevations and circulation in the upper BoF, especially in the Minas Basin. The far-field effect of tidal energy extraction in the Passage on the 3D tidal circulation in the BoF-GoM is examined in two cases of harnessing tidal in-stream energy from (a) the entire water column and (b) the lower water column within 20 m above the bottom in the Passage. The 3D model results demonstrate that tidal in-stream energy extraction from the lower water column has less impact on the tidal elevations and circulation in the BoF-GoM than the energy extraction from the whole water column in the Minas Passage.