Masaya volcano, Nicaragua, has been the site of tremendous Plinian basaltic eruptions. Two eruptions ~6,500 and 2,250 BP formed the 6 kilometer (km) x 11 km, northwest trending Masaya caldera. The present day active Santiago Crater within the caldera is the site of persistent volcano degassing and occasional phreatic explosions. While the mechanism responsible for these phreatic explosions is unclear, one possible explanation is the interaction of groundwater with the shallow magma chamber beneath Masaya. This interaction with meteoric water is supported by the substantial steam discharge from the vent, which is significantly larger than other similar volcanoes in the world. To better understand these interactions, the distribution of groundwater was characterized for the volcano based on interpretation of 29 Transient Electromagnetic (TEM) soundings. The TEM data were modeled using two independent methods to estimate resistivity as a function of depth. Results from modeling the TEM data indicate an overlying highly resistive layer throughout the caldera that is underlain by one or more conductive layers. The implied water table of the caldera is expressed as a subdued replica of the topography in the higher vent regions in the central and southern portions of the caldera and decreases to a level that coincides with the elevation Lake Masaya in the lower sections of the caldera. The water table elevation in the caldera also shows a marked difference from the regional groundwater flow system as there is a large gradient in head values suggesting a sharp change in transmissivity along the caldera boundaries, which indicate the caldera is hydraulically isolated from the surrounding region. In order to better understand the hydrologic processes at Masaya caldera, a 3-D finite difference groundwater model was created using the 29 estimated water levels and two groundwater flux measurements to simulate the hydrologic system The model calibration revealed that a deep, highly permeable layer must feed the active vent in order for the steam emissions to be maintained at their current levels. This information about the caldera provides a baseline for forecasting the response of this isolated groundwater system to future changes in magmatic activity.