This report documents a computer program, the Subsidence and Aquifer-System Compaction (SUB) Package, to simulate aquifer-system compaction and land subsidence using the U.S. Geological Survey modular finite-difference ground-water flow model, MODFLOW-2000. The SUB Package simulates elastic (recoverable) compaction and expansion, and inelastic (permanent) compaction of compressible fine-grained beds (interbeds) within the aquifers. The deformation of the interbeds is caused by head or pore-pressure changes, and thus by changes in effective stress, within the interbeds. If the stress is less than the preconsolidation stress of the sediments, the deformation is elastic; if the stress is greater than the preconsolidation stress, the deformation is inelastic. The propagation of head changes within the interbeds is defined by a transient, one-dimensional (vertical) diffusion equation. This equation accounts for delayed release of water from storage or uptake of water into storage in the interbeds. Properties that control the timing of the storage changes are vertical hydraulic diffusivity and interbed thickness. The SUB Package supersedes the Interbed Storage Package (IBS1) for MODFLOW, which assumes that water is released from or taken into storage with changes in head in the aquifer within a single model time step and, therefore, can be reasonably used to simulate only thin interbeds. The SUB Package relaxes this assumption and can be used to simulate time-dependent drainage and compaction of thick interbeds and confining units. The time-dependent drainage can be turned off, in which case the SUB Package gives results identical to those from IBS1. Three sample problems illustrate the usefulness of the SUB Package. One sample problem verifies that the package works correctly. This sample problem simulates the drainage of a thick interbed in response to a step change in head in the adjacent aquifer and closely matches the analytical solution. A second sample problem illustrates the effects of seasonally varying discharge and recharge to an aquifer system with a thick interbed. A third sample problem simulates a multilayered regional ground-water basin. Model input files for the third sample problem are included in the appendix.