  We report on a calculation of the light hadron spectrum and quark masses in
three-flavor dynamical QCD using the non-perturbatively O(a)-improved Wilson
quark action and a renormalization-group improved gauge action. Simulations are
carried out on a 16^3 \times 32 lattice at \beta=1.9, where a^{-1} \simeq 2GeV,
with 6 ud quark masses corresponding to m_{pi}/m_{rho} \simeq 0.64-0.77 and 2 s
quark masses close to the physical value. We observe that the inclusion of
dynamical strange quark brings the lattice QCD meson spectrum to good agreement
with experiment. Dynamical strange quarks also lead to a reduction of the uds
quark masses by about 15%.
