Detailed pathway of wave energy exchange between the Pacific and Indian Oceans through the Indonesian archipelago and associated energy dissipation are investigated by using a reduced gravity model with realistic coastline. The wave energy flux analysis that can be applicable for all latitudes in a linear shallow water system is adopted. The energy fluxes diagnosed from the model outputs for the incoming Rossby waves from the Pacific clearly indicate two major energy pathways to the Indian Ocean; one turning southward in the Halmahera Sea and reaches the Indian Ocean via the Banda Sea and the Timor Passage, the other passing through the Makassar and Lombok Straits. The former route, however, is shifted to the western side of the island chain within the Banda Sea due to energy trapping around the island chain. It is also found that strong energy dissipation occurs along the northern coast of New Guinea when the period of the incoming Rossby wave is shorter than 1.5 year. In the case of the Kelvin waves from the Indian Ocean, it is found that the major energy pathway is through the Lombok and Makassar Straits to the Pacific Ocean. However, there appears another pathway along the eastern side of the Sulawesi Island in the Banda Sea to exit through the Molucca Sea only when the wave period is shorter than about one month. This secondary pathway makes it easier for the wave energy from the Indian Ocean to reach the western Pacific Ocean for the short period waves.