A wave observation buoy has been developed, which uses a system where incident wave height in the ocean can be obtained from the heave motion of the buoy measured using a gyro system and the heave response function determined through theoretical calculations and model experiments. The accuracy of the theoretical calculation of the response function of the buoy motion was first confirmed by model experiments in a wave tank. Next, the validity of the method was verified by comparing the time series of irregular wave profiles measured with a wave height meter fixed in the wave tank and a reproduced series using the heave motion of the buoy model measured with a motion sensor and the response function. A real buoy was designed and constructed based on these studies and has been moored in the sea near Ishigaki Island since March of 2001. Finally, the wave data obtained using the above method were compared with those directly obtained from motions measured with a gyro and the relative wave height measured with a wave sensor fixed to the buoy, and the results were discussed.