A two-dimensional, two-phase and multi-component flow and transport model has been developed to simulate the flow and transport phenomena in the cathodes of PEM fuel cells. First, the governing equations based on a “two-phase mixture model” are derived by using a unified approach that describes the flow and transport in the gas channel and gas diffuser simultaneously. Then, the detailed boundary conditions are discussed especially at the gas diffuser/catalyst layer interface, which couples the flow, transport, potential and current density in the anode, the catalyst layer and membrane. Next, the model is validated by comparing the modeling results with experimental data. Further, typical distributions of oxygen and water-mass fraction in the “two-phase mixture,” as well as water vapor mass fraction, liquid saturation and liquid velocity vector are presented. Finally, the model is used to study the influences of two of the most critical issues of PEM fuel cell operation: i.e., the water and the thermal management on the two-phase flow. It was found that the two-phase flow characteristics in the cathode depend on some of the following factors: current density, operating temperature, and cathode and anode humidification temperatures. The dependence of the formation and the distribution of the two-phase flow in the gas diffuser and gas channel on these factors is explored. By studying the effects of these parameters on the two-phase flow and the fuel cell performance, the model can be used to study a water and thermal management scheme.