The distribution of groundwater beneath Masaya Volcano, in Nicaragua, and its surrounding caldera was characterized using the transient electromagnetic method (TEM). Multiple soundings were conducted at 30 sites. Models of the TEM data consistently indicate a resistive layer that is underlain by one or more conductive layers. These two layers represent the unsaturated and saturated zones, respectively, with the boundary between them indicating the water-table elevation. A map of the TEM data shows that the water table in the caldera is a subdued replica of the topography, with higher elevations beneath the edifice in the south-central caldera and lower elevations in the eastern caldera, coinciding with the elevation of Laguna de Masaya. These TEM data, combined with regional hydrologic data, indicate that the caldera in hydrologically isolated from the surrounding region, with as much as 60??m of difference in elevation of the groundwater table across caldera-bounding faults. The water-table information and estimates of fluxes of water through the system were used to constrain a numerical simulation of groundwater flow. The simulation results indicate that basalt flows in the outer parts of the caldera have a relatively high transmissivity, whereas the central edifice has a substantially lower transmissivity. A layer of relatively high transmissivity must be present at depth within the edifice in order to deliver the observed flux of water and steam to the active vent. This hydrologic information about the caldera provides a baseline for assessing the response of this isolated groundwater system to future changes in magmatic activity. ?? 2007.