An eddy-permitting state estimate for the South China Sea (SCSSE) spanning 1992–2016 is developed and employed to investigate the Luzon Strait dynamics through adjoint sensitivity analysis. The estimate assimilates climatological and satellite-based observational constraints via an adjoint-based variational framework. Iterative optimization adjusts initial states, atmospheric forcings, and vertical eddy diffusivity as control variables. Comparison with available observations indicates good agreement, supporting the reliability of the SCSSE as a long-term estimate. A key advantage is its improved representation of regional oceanic structure and variability, achieved by combining numerical modeling with observations while preserving dynamical consistency. Using the SCSSE as a baseline, the study explores the mechanisms behind the persistent westward abyssal overflow through the Luzon Strait. Sensitivity analysis reveals strong dependence of the overflow volume flux on South China Sea vertical diffusivity, with positive correlation above and negative below a bifurcation depth, where isopycnal tilting begins. Combined with the observed eastward middle-layer flow and theory attributing the overflow to the density contrast between the bifurcation and sill depths east of the strait, the results suggest that the vertical gradient of mixing near the bifurcation depth modulates the overflow by shaping the western Pacific density structure.