Societies today face an array of global, water-related challenges with significant scientific dimensions within the Food-Energy-Water-Nexus. To prepare students to become tomorrow's global citizens, undergraduate course must provide them with opportunities to learn and reason about socio-hydrological issues that include both natural and human dimensions, such as agricultural water use, water quality, and water security. However, prior research has illustrated limitations in undergraduate students' disciplinary knowledge and little research has been conducted to understand how they use this knowledge to solve problems and make decisions about socio-hydrological systems (i.e., water literacy). Here, we report on discipline-based education research from an innovative, interdisciplinary course in which we – a team of faculty and graduate students with expertise in hydrology, economics, and science education - engage a diverse population of students – both STEM and non-STEM majors – from a variety of backgrounds. Principles of effective undergraduate STEM instruction underlying the course include and emphasis on active learning, socio-hydrological systems, student engagement with authentic hydrological data, and computer-based modeling tools (Author, 2018). Over the past four years, we have investigated undergraduate students' model-based reasoning about socio-hydrological systems, leveraging theoretical perspectives on model-based teaching and learning, science-informed decision-making, and socio-hydrologic systems. Our research has provided evidence for growth in students' conceptual understanding of water-related phenomena and model-based reasoning about socio-hydrological systems. They also provide insight into how students leverage modeling tools grounded in authentic hydrologic datasets to problem-solve real-world, water-related challenges. Gain scores for pre-/post-course assessments of students' content knowledge have shown to be predictive of their socio-hydrological reasoning. Research findings also document the evolution of the course from a traditionally-structured, classroom-based course to a 'flipped'-style course structure, which we hypothesize to have positively impacted students' overall experience in the course, as well as targeted outcomes for student learning.