This report describes a pilot project to develop a watershed-based wetlands characterization using digital data and GIS technology for the state of Maine. The Casco Bay Watershed Wetlands Characterization Method determines relative significance of wetlands within a watershed based upon six indicator functions: Floodflow Alteration, Sediment Retention, Plant and Animal Habitat, Finfish Habitat, Shellfish Habitat, and Education and Research. The following describes how the characterization was prepared for Casco Bay. A GIS database was built using only data available for the entire state so that the method could be applied to other watersheds. The GIS includes a series of queries that are combined with the data layers to infer whether individual wetlands have the ability to provide the indicator functions at a significant level. For example, a wetland is considered to provide Sediment Retention at a significant level if it contains all of the following: (a) slope less than 3%, (b) emergent vegetation, and (c) is in close proximity to a river, stream, or lake. Once the GIS layers were in place, the individual National Wetlands Inventory (NWI) polygons were dissolved to form wetland complexes. The queries were applied to each wetland complex and the results summarized in tables and maps. The tables note when there is a hit, i.e., wetland provides specific indicator function at a significant level. This information was used to create a new Multihit Layer that displays the total number of hits per wetland complex. Once the characterization was completed, the wetlands were prioritized using a Risk Index Layer.