Water management is one of the most critical issues for high-performance polymer-electrolyte-membrane (PEM) fuel cells. A water-flux model for vapor and liquid phases along a gas flow channel is developed. The dependency of the operating and design parameters, such as temperature, pressure, gas and liquid flow rate, and size of the fuel cell, on the water management along the flow channel is demonstrated. Issues associated with liquid water and membrane/electrode dry out as well as system water balance are identified. An "intracell" water-exchange method, which can remove or supply water within a cell depending on local demand, is described. This water management scheme effectively minimizes the issues described above. Good cell performance with a high limiting current at low reactant pressure and high reactant utilization is demonstrated with this advanced water management system. (C) 2004 American Institute of Chemical Engineers.