Parameter estimation and contaminant source characterization are key steps in the development of a coupled groundwater flow and contaminant transport simulation model. Here a methodologyfor simultaneous model parameter estimation and source characterization is presented. The parameter estimation/source characterization inverse model combines groundwater flow and contaminant transport simulation with non-linear maximum likelihood estimation to determine optimal estimates of the unknown model parameters and source characteristics based on measurements of hydraulic head and contaminant concentration. First-order uncertainty analysis provides a means for assessing the reliability of the maximum likelihood estimates and evaluating the accuracy and reliability of the flow and transport model predictions. A series of hypothetical examples is presented to demonstrate the ability of the inverse model to solve the combined parameter estimation/source characterization inverse problem. Hydraulic conductivities, effective porosity, longitudinal and transverse dispersivities, boundary flux, and contaminant flux at the source are estimated for a two-dimensional groundwater system. In addition, characterization of the history of contaminant disposal or location of the contaminant source is demonstrated. Finally, the problem of estimating the statistical parameters that describe the errors associated with the head and concentration data is addressed. A stage-wise estimation procedure is used to jointly estimate these statistical parameters along with the unknown model parameters and source characteristics. ?? 1992.