A new process for simulating three-dimensional (3-D) variably saturated flow (VSF) using Richards' equation has been added to the 3-D modular finite-difference ground-water model MODFLOW. Five new packages are presented here as part of the VSF Process--the Richards' Equation Flow (REF1) Package, the Seepage Face (SPF1) Package, the Surface Ponding (PND1) Package, the Surface Evaporation (SEV1) Package, and the Root Zone Evapotranspiration (RZE1) Package. Additionally, a new Adaptive Time-Stepping (ATS1) Package is presented for use by both the Ground-Water Flow (GWF) Process and VSF. The VSF Process allows simulation of flow in unsaturated media above the ground-water zone and facilitates modeling of ground-water/surface-water interactions. Model performance is evaluated by comparison to an analytical solution for one-dimensional (1-D) constant-head infiltration (Dirichlet boundary condition), field experimental data for a 1-D constant-head infiltration, laboratory experimental data for two-dimensional (2-D) constant-flux infiltration (Neumann boundary condition), laboratory experimental data for 2-D transient drainage through a seepage face, and numerical model results (VS2DT) of a 2-D flow-path simulation using realistic surface boundary conditions. A hypothetical 3-D example case also is presented to demonstrate the new capability using periodic boundary conditions (for example, daily precipitation) and varied surface topography over a larger spatial scale (0.133 square kilometer). The new model capabilities retain the modular structure of the MODFLOW code and preserve MODFLOW's existing capabilities as well as compatibility with commercial pre-/post-processors. The overall success of the VSF Process in simulating mixed boundary conditions and variable soil types demonstrates its utility for future hydrologic investigations. This report presents a new flow package implementing the governing equations for variably saturated ground-water flow, four new boundary condition packages unique to unsaturated flow, the Adaptive Time-Stepping Package for use with both the GWF Process and the new VSF Process, detailed descriptions of the input and output files for each package, and six simulation examples verifying model performance.