Multiple rivers flowing into the same bay can be correlated in water quality management and together determine the environmental status of the bay. Nonpoint source pollution management for multi-watershed aiming to alleviate environmental contamination can be under additional challenges and yield considerable economic and environmental benefits. In this study, a Bayesian simulation-based multi-watershed effluent trading designing model (BS-METM) is established for multi-watershed nonpoint source pollution management through incorporating techniques of water quality simulation, uncertainty analysis with Bayesian inference, optimal design for effluent trading, as well as mechanism analysis. BS-METM is capable of reflecting parameter uncertainties in nutrient simulation, disclosing the detailed optimal trading schemes under the impact of uncertainties and vital factors, and identifying optimal effluent trading mechanisms through revealing interaction among trading processes of multiple watersheds. BS-METM is applied to a real case of adjacent coastal watersheds (i.e. Daguhe and Moshuihe watersheds), which are identified as major sources of total phosphorus and ammonia nitrogen loadings to Jiaozhou Bay, China. Effluent trading optimization under multiple mechanisms, including intra-watershed trading, cross-watershed trading and non-trading, are conducted. The optimized industry scales and trading processes are obtained. The effects of vital factors on the trading process (i.e. environmental allowance-violation risk level and water availability level) are investigated. The interactions between water availability level and trading mechanism are also analyzed. It is proved that non-trading mechanism would be recommended under low water availability level and cross-watershed trading mechanism would be recommended under medium and high water availability level. The results provide a solid scientific basis for nonpoint source pollution management as well as effective sustainable development for multi-watershed region.