Errors in the estimated constituent concentrations in optically complex waters due solely to sensor noise in a spaceborne hyperspectral sensor can be as high as 80%. The goal of this work is to elucidate the effect of signal-to-noise ratio (SNR) on the accuracy of retrieved constituent concentrations. Large variations in the magnitude and spectral shape of the reflectances from coastal waters complicate the impact of SNR on the accuracy of estimation. Due to the low reflectance of water, the actual SNR encountered for a water target is usually quite lower than the prescribed SNR. The low SNR can be a significant source of error in the estimated constituent concentrations. Simulated and measured at-surface reflectances were used in this study. A radiative transfer code, Tafkaa, was used to propagate the at-surface reflectances up and down through the atmosphere. A sensor noise model based on that of the spaceborne hyperspectral sensor HICO was applied to the at-sensor radiances. Concentrations of chlorophyll-a, colored dissolved organic matter, and total suspended solids were estimated using an optimized error minimization approach and a few semi-analytical algorithms. Improving the SNR by reasonably modifying the sensor design can reduce estimation uncertainties by 10% or more.