Atoll reef islands are highly vulnerable to climate change because of their low elevation, exposure to ocean swells, and dependence on coral reef health. However, Sea Surface Height (SSH) and Significant Wave Height (SWH) variability across large atolls remain poorly documented due to limited in-situ observations. Satellite altimetry offers strong potential for monitoring these environments. In particular, the Surface Water and Ocean Topography mission (SWOT), through its Ka-band Radar Interferometer (KaRIn), enables two-dimensional observations of SSH and SWH at unprecedented resolution, offering new opportunities to investigate the barrier-reef lagoon dynamics of atoll islands. Yet, the performance of SWOT observations in such complex coastal settings must first be assessed. In this study, we compare KaRIn measurements with wave buoy, tide gauge, and in-situ Global Navigation Satellite System (GNSS) data collected over the Rangiroa atoll in 2025. Results show that KaRIn measures lagoon SWH with a bias of 10–30 cm and a centered root mean square error (CRMSE) of 10–13 cm, outperforming the global wave model currently used to estimate Sea State Bias (SSB) in current SWOT Level-2 products. Recomputing SSB using KaRIn SWH improves SSH agreement with in-situ observations by up to 3 cm. Spatial comparisons with GNSS-derived SSH also show that KaRIn captures strong SSH gradients near the main pass and northern atoll. Finally, improved SSH anomaly fields using time-averaged KaRIn SSH reveal differences of up to 50 cm between lagoon and ocean water levels driven by wave and tidal forcing.