Abstract Agriculture is the main source of nitrogen (N) and phosphorus (P), which are the nutrients accelerating the eutrophication of waters in Finland. Hence, mitigation measures are needed to reduce the nutrient loading from the arable land. Since Finland’s accession to the EU in 1995 and the subsequent adaptation to its agri-environmental policy, constructed wetlands (CWs) have been one of the mitigation measures for which farmers may receive agri-environmental subsidies. The aim of this study was to find out how efficiently such CWs are able to retain the loading and how they should be designed and dimensioned in order to optimize their performance. Particular attention was paid to CW hydrology and hydraulics, since the dynamics of the water flowing through a CW is the major factor governing retention. Water quality and flow measurements were made in three CWs located in agricultural watersheds in southern Finland during 1999–2002. Hydraulic properties were examined in 2 of the CWs by simulations with 2-dimensional hydrodynamic and water quality models. According to the calculations of material fluxes, the maximum annual retention was 72% for solid material (TSS), 67% for total P and 40% for total N. The lowest retentions were slightly negative, because the CW with the smallest CW-to-watershed area ratio (0.5% in the Alastaro CW) sometimes acted rather as a source than a sink of nutrients. The highest percent retentions were found in the Hovi CW with the largest CW-to-watershed area ratio (5%). In terms of mass per CW area, the Hovi CW retained 25 kg of total P and 300 kg of total N per one hectare per one year. In the Hovi CW also dissolved reactive P retention was high (49% in situ and 34% in laboratory microcosm experiments), obviously due to high contents and low P saturation of Al and Fe oxides of the CW soil. The basic underlying reason behind the high retentions of both dissolved nutrients and particulate matter in the Hovi CW was the long water residence time coupled with high hydraulic efficiency. In the deep part of the Hovi CW, near-bottom increase of dissolved O2 was found in phase with diurnal temperature changes. The oxygen transport by this kind of convective circulation of CW water inhibited near-bottom anoxia and thus decreased the risk of P desorption. According to the hydrodynamic simulations coupled with simulated tracer tests made for the Hovi CW, a 40% improvement in hydraulic efficiency was achieved by baffles directing the main flow to optimally exploit the CW area. The rectangular, elongated shape of the Alastaro CW also showed fairly high hydraulic efficiency. Hydrodynamic simulations were also coupled with a sediment transport model, which proved to be a useful method in predicting the change of TSS concentrations in CWs. Hourly datasets of inflow and outflow revealed high attenuation of runoff peaks in the well-designed and -dimensioned Hovi CW. The hourly outflow modeled with the reservoir routing method corresponded to the observed with a reasonable accuracy. When carefully designed, painstakingly implemented and wisely located, CWs may — even in cold climate — efficiently contribute to agricultural water pollution control.