A three-dimensional model is applied to the South China Sea to study the generation of internal tides in the Luzon Strait, a mixed diurnal dominant barotropic tidal environment. The computed internal tidal flux is in good agreement with limited observations and with estimates from the barotropic tidal inversion. The diurnal internal tides are simple harmonic oscillations. The semidiurnal internal tides, on the other hand, are highly nonlinear with striking daily amplitude variations. Comparison with an analytical mixed internal tide–lee wave model shows that the diurnal modulation is caused by interaction of barotropic diurnal tidal currents with the linear internal waves. The highly nonlinear semidiurnal internal tides likely is responsible for the observed diurnally modulated nonlinear internal waves in the South China Sea. The semidiurnal internal tides also appears to be the major source for the enormous vertical mixing in the Luzon Strait.