The gas diffusion layer (GDL) plays an important role in maintaining suitable water management in a proton exchange membrane fuel cell. The properties of the gas diffusion layer, such as its porosity, permeability, wettability, and thickness, are affected by the shoulders of the bipolar plates due to the compression applied in the assembly process. Compression therefore influences the water management inside fuel cells. A two-phase fuel cell model was used to study the water management problem in a proton exchange membrane fuel cell with interdigitated flow channels. The effect of the compression on the fuel cell performance was numerically investigated for a variety of GDL parameters. This paper focuses on studying the water management of fuel cells under compression for various types of gas diffusion layers. First, the deformation of a gas diffusion layer due to compression applied from the shoulders of the bipolar plates was modeled as a plain-strain problem and was determined using finite element analysis (FEA). The porosity and the permeability of the gas diffusion layer were then recalculated based on the deformation results. Next, the deformed domain from the FEA model was coupled with a fuel cell model, and the effects of the compression during the assembly process on the water management and fuel cell performance were studied for gas diffusion layers with different thicknesses, porosities, and compressive moduli. It was found that the deformation of the GDL results in a low oxygen concentration at the reaction site. The saturation level of liquid water increases along the flow direction, and is higher when the compression effect is considered in the simulation.