The past two decades have seen an intensive development in two-way coupled atmospheric and hydrological models, providing new opportunities to thoroughly understand hydrology–atmosphere coupling and improve hydrometeorological forecasting, which has not been possible before. This paper summarizes recent developments in hydrological presentation in land surface models (LSMs) and climate models, and the two-way coupling of atmospheric and hydrological models. The fully coupled models have been widely applied in identifying the impact of lateral surface and subsurface water transport in a land–atmosphere coupled system, and hydrometeorological simulations using techniques such as parameter calibration, data assimilation, and hydrology model structure revision have been used to improve the model accuracy. However, their applications still face major challenges, e.g., the complexity of hydrological parameter calibration, the lack of understanding of the physical mechanisms at high resolution, the parameterization of anthropogenic activities, and the limitations in simulation domain and period. Despite these difficulties, fully coupled atmospheric and hydrological models will gradually evolve into powerful tools to reproduce regional water cycles, offering significant potential for scientifically investigating water resources security issues affected by both climate change and human activities.