Waterfall Cave is a small, shallow loop cave at the back of Waterfall Bay, below the point where the waterfall spills from the clifftop. The Marine Life Network site guide lists it in 4-15 m and notes it as a place where broadnose sevengill sharks have been seen resting, an unusual encounter for a site this shallow. The cave is a through-passage rather than a deep system, so daylight is visible from both ends and it makes a gentler introduction to cave-style diving than Cathedral Cave.

Its walls carry the same shaded-habitat community that makes Waterfall Bay famous: jewel anemones, golden zoanthids, encrusting sponges and bryozoans, with bullseyes gathering in the darker corners. Outside the cave the reef consists of dolerite boulders and short walls covered in kelp and brown algae, with weedy seadragons, wrasse and leatherjackets. The main attraction for many is the chance of a sevengill shark: these large, slow-moving sharks sometimes sit quietly on the floor of caves and gutters along this coast.

They are normally unconcerned by divers who keep their distance and stay calm, but should never be crowded or touched. Because it is close to the cliff, the site is sensitive to swell and surge, and after heavy rain the waterfall can put a freshwater lens on the surface that reduces visibility for a day or two. In calm weather it is a short, scenic dive that combines well with a deeper wall dive on the same boat trip.

The shore approach described in the older guides is rarely used now that operators run boats daily from Pirates Bay; if you consider it, check the track and the entry rocks beforehand and have a plan for exiting if swell rises.

Usually dived by boat: Eaglehawk Dive Centre and Go Dive Tasmania run from the Pirates Bay jetty at Eaglehawk Neck, about 8 minutes to Waterfall Bay. The Marine Life Network guide also records shore access from Waterfall Bay Road: turn off the Arthur Highway at Eaglehawk Neck onto Blowhole Road/Tasman Arch Road, follow signs to the Waterfall Bay car park, then walk down to the rocks. This means carrying full cold-water kit down a steep bush track and climbing back up afterwards, so it is only realistic for fit, experienced divers in dead-calm conditions; most people dive it from the boat.

Waterfall Bay is the most sheltered part of the Tasman Peninsula's ocean coast and is the site operators fall back on when the Sisters and Hippolytes are blown out, because the bay faces east-north-east and the high cliffs block westerly and south-westerly winds. It is cancelled by easterly and north-easterly winds and by large south-easterly swell wrapping into the bay, which drives heavy surge into the caves and gutters. For cave and swim-through dives the swell needs to be small (well under about 1.5 m) or the surge becomes dangerous.

Heavy rain turns the waterfall on and can put a fresh, tannin-stained layer on the surface for a day or two. Late summer and autumn give the calmest, clearest conditions; winter mornings with westerlies are often excellent.

Enter the cave at about 10-12 m, follow the loop through the daylight zone and exit through the second opening, then explore the boulders and wall outside at 10-15 m. Keep the swim short and shallow and finish under the waterfall cliff for the safety stop.

Eaglehawk Dive Centre – included among its Waterfall Bay cave and canyon dives when calm; Go Dive Tasmania – Waterfall Bay boat days; otherwise private boats and club divers.