To date, multiphase computational fluid dynamics models for proton exchange membrane (PEM) fuel cells failed to provide even a qualitative depiction of the fuel cell water management. This was primarily due to the inability to capture two-phase phenomena in the cathode catalyst layer and the water saturation equilibrium at the interface between the fuel cell components. A model without the cathode catalyst layer cannot capture dominant mechanisms of water transfer and cannot explain correctly the fuel cell performance. We propose a multifluid, multiphase model consisting of separate transport equations for each phase. The model accounts for gas- and liquid-phase momentam and species transport in the cathode channel, gas diffusion layer (GDL), and catalyst layer and for the current density, ionomer-phase potential, and water content in the catalyst coated membrane. The model considers water produced at cathode by (I) electrochemical reaction, (II) change of phase, and (III) parallel, competing mechanisms of water transfer between the ionomer distributed in the catalyst layer and the catalyst layer pores. Liquid water is transported in the GDL and the catalyst layer due to liquid pressure gradient and in the channel due to gravity and two-phase drag. We have developed a transport equation for the water content. The source/sink terms of the transport equation represent the parallel, competing mechanisms of water transfer between the ionomer phase and the catalyst layer pores. They are (I) sorption/desorption at nonequilibrium and (II) electro-osmotic drag by the secondary current. Another distinguishing feature of this model is the capability to capture water saturation equilibrium at channel-GDL and GDL–catalyst layer interfaces. The computational results are used to study the dynamics of water transport within and between the fuel cell components and the impact of the GDL and catalyst layer properties on the amount of water retained in the fuel cell components during operation. A new dominant mechanism of water transfer between the ionomer distributed in the catalyst layer and the catalyst layer pores is identified. The amount of water retained in GDL is determined by GDL permeability and its pore size at the interface with the channel. The amount of water retained in the cathode catalyst layer is determined by the saturation equilibrium at the interface with the GDL. Models based on the two-phase mixture model are not applicable to PEM fuel cell electrodes.