The transport and kinetic processes describing biomolecular interactions in the BIACORE optical biosensor have been studied with the help of a mathematical model. In comparison to previous models, the model presented here couples, for the first time, transport phenomena in the flow channel with hindered diffusive transport and reactions inside the hydrogel. Simulated experiments based on this model, and two simpler models extant in the literature, are used to identify cases under which the detailed model is essential for accurate prediction of kinetic parameters. It is shown that this model can substantially improve the accuracy of kinetic parameter estimation when transport limitations in the flow channel and/or the hydrogel significantly influence the observed instrument response curves. The model can extend the range of the instrument's applicability to higher concentrations of immobilized species within the hydrogel. It can also be used for accurate design of experiments with the purpose of minimizing errors in the estimation of the kinetic parameters.