For the numerical simulation of underwater wet flux-cored arc welding, the most crucial issue is to investigate the intense interactions between the underwater bubble, arc plasma, and molten metal. However, it is a great challenge to couple them into a single numerical model. In this study, a 3D three-phase flow model is originally established, which successfully couples the dynamic bubble, arc, and droplet. A modified Lee model is employed to realize spontaneous phase transition from liquid water to bubble gas. According to the simulation results, the bubble evolution is divided into four main stages, and two bubble separation modes are recognized. It is found that, both the changing pressure field around the bubble and the varying flow direction of surrounding water contribute to the unique bubble evolution patterns. As for the droplet, its violent up-and-down oscillation at the wire tip is mainly caused by the opposite gas drag forces, which are produced by the turbulent gas flow inside the bubbles. The upward gas drag force can even make the neck of the droplet disappear. With different droplet detaching angles, two predominant droplet transfer modes are numerically produced; when the angle reaches 147°, the droplet is pushed away and becomes a spatter. Furthermore, the underwater arc is found to be subjected to compressions from both the radial direction due to bubble necking and the axial direction due to droplet growth. The arc temperature and velocity vary significantly not only during the whole droplet transfer period, but also within each bubble evolution cycle. To verify the reliability of the model, underwater welding experiments and visual sensing are conducted. The simulated results match well with the experimental ones, with an 8% error in the droplet transfer period and only a 1.4% error in the bubble evolution cycle.