Proton exchange membrane (PEM) fuel cells have emerged, in the last decade, as a viable technology for power generation and energy conversion. Fuel cell (FC) engines for vehicular applications possess many attributes such as high fuel efficiency, low emission, quiet and low temperature operation, and modularity. An important phenomenon limiting fuel cell performance is the two-phase flow and transport of fuel and oxidant from flow channels to reaction sites. In this paper a mathematical model is presented to study the two-phase flow dynamics, multi-component transport and electrochemical kinetics in the air cathode, the most important component of the hydrogen PEM fuel cell. A major feature of the present model is that it unifies single- and two-phase analyses for low and high current densities, respectively, and it is capable of predicting the threshold current density corresponding to the onset of liquid water formation in the air cathode. A numerical study based on the finite volume method is then undertaken to calculate the detailed distributions of local current density, oxygen concentration, water vapor concentration and liquid water saturation as well as their effects on the cell polarization curve. The simulated polarization curve and predicted threshold current density corresponding to the onset of liquid water formation for a single-channel, 5cm2 fuel cell compare favorably with experimental results. Quantitative comparisons with experiments presently being conducted at our laboratory will be reported in a forthcoming paper.