This study deals with a bottom outlet that causes significant surges at both the inlet and exit. The bottom outlet comprises an intake, a vertical shaft and a tunnel underneath the rockfill dam and a submerged exit. In the intake tower, a cylinder gate controls hexagonal openings near the reservoir bottom. Operations during the dam construction show that discharges at a low reservoir water level result in upsurges of air-water mixture within the hollow gate cylinder and blowouts in the tailwater. To understand the flow behaviors, 3D CFD modeling is performed to examine air entrainment at the intake and transport down the waterway. Both low and high water levels are simulated, and the air-water flow phenomenon is reproduced. In both cases, air pockets are generated, which undergo accumulation and breakup process. When moving downstream, they could cause severe surface fluctuations, even blowouts. Consequently, engineering solutions are required to address this issue. The aim of this study is to provide basis for risk assessment of outlet operations and potential rehabilitation measures.