Water management is a major issue in the operation of PEM fuel cells. Two-phase flow has been commonly observed in PEM fuel cell channels from experiments. One of the two-phase flow patterns, the slug flow, has great negative impacts on the fuel cell performance. In this work, the impact of two-phase flow patterns, especially the slug flow, on the fuel cell performance was simulated using a 3D volume fluid model (VOF) coupling with a 1D membrane electrode assembly (MEA) model. The proposed model is capable of describing the two-phase flow patterns, especially the slug flow in the cathode side gas flow channels. The comparison of fuel cell performance between single phase flow and two-phase flow shows that the presence of slug flow decreases the cell voltage output in the mass transport region, but has little effect in the kinetic and ohmic region. However, the slug flow causes great increase of overall pressure drop, which should be avoided during the PEM fuel cell operation. Effects of gas stoichiometric flow ratios on the fuel cell performance were then simulated. Increasing the gas flow rate significantly broadens the ohmic region, enabling the fuel cell to be operated at higher current densities. However, given a fixed current density during fuel cell operation, too high a gas flow rate will result in high pressure drops with little improvement in the fuel cell performance. Changing channel wall or MEA surface wettability also has great impact on the PEM fuel cell performance and two-phase flow pattern in the channel. Using a more hydrophobic MEA surface is helpful to extend the ohmic region and increase PEM fuel cell performance. Using too hydrophilic or too hydrophobic channel wall is not recommended, since either reduces the cell output voltage. (C) 2012 Elsevier Ltd. All rights reserved.