An underlying requirement for any Autonomous Underwater Vehicle (AUV) is to navigate through unknown or partly unknown environments while performing certain user specified tasks. The loss of an AUV due to collision is unjustifiable both in terms of cost and replacement time. To prevent such an unfortunate event, one requires a robust and effective Collision Avoidance System (CAS). This paper discusses the collision avoidance problem for the HUGIN AUVs. In the first part, a complete simulator for the HUGIN AUV is implemented in matlab and simulink. This includes a 6 degrees-of-freedom nonlinear AUV model, simulated environment including bottom profile and surface ice, navigation- and guidance functionality and sensor simulators. In the second part a number of well known strategies for the collision avoidance problem is presented with a short analysis of their properties. On the basis of the implemented simulator, a proposed CAS is developed and it’s performance is analyzed. This system is based on simple principles and known collision avoidance strategies, in order to provide effective and robust performance. The proposed system provides feasible solutions during all simulations and the collision avoidance maneuvers are performed in accordance with the specified user demands. The developed simulator and collision avoidance system is expected to provide a suitable framework for further development and possibly a physical implementation on the HUGIN AUVs.