Waterfall Bay lies on the eastern side of the island below the Christmas Island Resort, the former casino, and near the waterfall that gives the area its name. Extra Divers list it as Resort Lagoon / Waterfall Bay and describe ledges, boulders and an impressive drop-off, calling it one of the island's most scenic and approachable dive spots, rated beginner with a depth range of 6–20 m.

The site is a stepped reef: ledges and limestone boulders form overhangs and small swim-throughs in the shallows, with hard corals and sea fans on the rocks, before the reef reaches a drop-off that falls away into the blue. Turtles are common here, resting under ledges or feeding on the reef, and trevally cruise the edge. Extra Divers mention seasonal visitors, which on this side of the island can include mantas and whale sharks in the wet season. Reef fish include butterflyfish, angelfish, triggerfish, groupers and schools of surgeonfish.

Its value to the operators is its position. When the north-west monsoon swell closes the north coast between December and March, the east coast is often sheltered, and Waterfall Bay becomes one of the go-to dives. In the dry season, when the south-east trade winds blow onto this coast, it is dived only on calm days.

It suits beginners and mixed groups, and the varied terrain of ledges and boulders makes it interesting for photographers. The land around the resort, with its golf course and nearby Grotto swimming cave, is worth exploring by car.

Fly from Perth (about 4 hours, two to three flights a week, some via Cocos Islands) and hire a car – there is no public transport. Both dive centres are in The Settlement and launch their boats from the jetty/boat ramp at Flying Fish Cove, normally at about 8 am for a two-dive morning trip. From the cove the boat runs east along the Settlement coast, round Coconut Point and south down the east coast along the coast for roughly about 15 minutes to Waterfall Bay below the resort.

There is no land access to the dive, and the vertical sea cliffs mean no exit other than the boat. Operators choose sites on the morning according to swell and wind.

On the east coast, which takes the full force of the south-east trade winds from roughly April/May to November, when 15–25 knot winds and wind swell usually make it rough and undiveable by boat. It becomes the fallback coast in the wet season (December–March): when the north-west monsoon swell closes the north coast, the east side is often sheltered and calm. Dive it on light-wind days or during the monsoon.

Beyond the fringing reef currents can be strong and the reef edge is washed by surge whenever there is any easterly swell. Visibility is typically 20–30 m and drops after rain and during red crab spawning (Oct–Jan), when Ethel and Greta Beaches are spawning sites.

Descend onto the ledges at 6–10 m, work through the boulders to the drop-off, follow it at 15–20 m, and return over the ledges for a safety stop at 5 m.

Extra Divers Christmas Island – regular site, especially when swell affects the north coast; CI Wet'n'Dry Adventures – occasional.