Effects of hysteresis with air entrapment on water content and head distributions, surface fluxes, and water balance components are investigated by finite element simulations of flow in one- and two-dimensional spatial domains. Results of one-dimensional analyses indicate that effects of hysteresis are markedly influenced by surface boundary conditions and to a lesser extent by initial conditions. Stipulation of flux-controlled boundary conditions results in minimal hysteretic effects, while potential-type boundary conditions produce substantial deviations between hysteretic and nonhysteretic simulations. The latter effects are attributable in large part to differences in surface conductivity associated with air entrapment. Predicted water content distributions for nonhysteretic simulations using main drying functions deviated much more from hysteretic model results than did predicted water content distributions for nonhysteretic simulations based on main wetting functions. For two-dimensional problems, predicted infiltration, evaporation, and seepage fluxes and soil water storage changes were much higher for nonhysteretic simulations using main drying functions than for hysteretic simulations; predictions based on main wetting functions deviated less markedly from hysteretic simulations. Introduction of heterogeneity in the porous medium diminished effects of hysteresis on infiltration and seepage but accentuated differences in evaporation due to interactions between evaporation and seepage boundaries, suggesting that the influence of heterogeneity on hysteretic effects will be problem-specific.