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Modeling of dynamical systems consists of mathematical equations used to understand the current and future behavior of such systems. Modeling has been successfully used in many engineering applications such chemical processes, aeronautics, and biological systems. This paper focuses on modeling of watershed systems. Watershed modeling is an essential tool that can be used by decision makers as well as researchers to assess current and future trend of water availability, water quality, and geological impacts, etc. The quality of the watershed model is crucial for the decision making process. The first objective of this paper is to provide systems engineers with background information of watershed modeling and its applications. It also provides a survey of existing watershed models and techniques. The quality of decision making process about the geological, social, and economical impacts of watersheds is heavily dependent on the quality of the available watershed model. Any improvement in the accuracy of such models will have great impact on the society and the environment. The availability of multiple sources of data allows for improvement of watershed modeling to become a reality. The second objective of this paper is to discuss the benefit of sensor data fusion in improved watershed models. Available techniques will be reviewed as well suggestions for future research on improving watershed models using multiple sources of information.