Based on the VOF method, a three-dimensional numerical analysis model coupling both droplets and arc behaviors is developed to simulate the metal transfer and arc plasma flow processes in underwater wet flux-cored arc welding. The relationships between several physical quantities such as droplet shape and temperature, electromagnetic force and current density of droplets and arc at different periods are analyzed. As it turns out, the special arc plasma component is the main reason why the arc concentrates on the bottom of the droplet, rather than being wrapped. As the volume of the droplet increases, the arc temperature decreases. The constriction of arc shape leads to the result that the welding current flow goes through from the droplet bottom–a small area to subjacent arc. Therefore, at the anode spot an intense electromagnetic spot force is formed. The droplets are also affected by the gas flow resistance inside the bubble. Under the combinative actions of the spot force and the gas flow resistance, the main mode of droplet transfer is large droplet repelled transfer. For verifying the reliability of the model, the real-time metal transfer process is captured by a high-speed camera, the experimental values and the simulated values are found to be in good agreement.