This paper describes the dynamic modelling, simulation and control of an underwater vehicle equipped with two degrees of freedom (DOF) planar underwater manipulator with all its joints revolute. Performance analysis of underwater vehicle and manipulator tracking control in spatial co-ordinates are done using numerical simulations. A PID controller based feedback linearization control design is developed for the underwater vehicle and manipulator. Controlled movement in surge (xdirection), sway (y-direction) and heave (z-direction) directions is achieved for the underwater vehicle and controlled movement in x-z (global) plane is achieved for the underwater manipulator, both with respect to inertial frame of reference. Simulation of tracking control of the robot using cubic polynomial equation based trajectory planning is done. © 2011 IEEE.