The main objective of groundwater modelling in Gash River Sub-basin, is to investigate the effect of hydrologic, hydrogeological parameters and stresses on hydrodynamic behaviour through the implementation of a realistic three-dimensional groundwater flow model. Severe decline of water level due to uncontrollable heavy abstraction, exposes a water scarcity problem especially in summer seasons. The model was developed for four geological layers encompassing two aquifer zones. The improved three-dimensional visual MODFLOW Code was selected, implemented and run using WHS method to solve the finite difference equation using trail-and-error calibration procedure at Kassala Area. The transient model was successfully calibrated with acceptable results of model calibration criteria. The contour maps of the simulated heads were performed as potentiometric surface. The general flow direction of the groundwater is from southeast towards northwest part of the area and from Gash River course towards the east and west directions as detected from gradual decreasing of potential line’s values in those directions, confirming the aquifer recharge from Gash River. The similarity of potentiometric surface contour maps of the two aquifers confirm the aquifers hydraulic interactions. It is found that the increasing pumping rate caused considerable increase in drawdown as detected from pumping rate incremental scenarios. Moreover, incremental pumping rate scenarios also reflected increasing river leakage into the aquifer system due to disturbance of water balance due to water level decline. The components of water budgets were calculated and its percentage was performed for the hydrologic balance. The difference between inflow and outflow of the water balance shows a deficit in most stress periods of the model simulations. Calibration fitness was accomplished at most of the observation wells suggesting that the groundwater model is an accurate representation of the actual historic groundwater system and confirm the validity of the model to forecasting purposes. It was found that the model is more sensitive to hydraulic conductivity and least sensitive to specific yield (Sy). Hence, precaution should be revealed for hydraulic conductivity in forecasting model usage.