Water hammer in two-phase systems, induced by direct steam condensation on subcooled water or by separation of subcooled water column, results in the most intensive pipeline pressure surges. Amplitudes of pressure spikes along the course of these dangerous transients strongly depend on the condensation and evaporation rates. The present paper provides a literature overview of thermal-hydraulic models for the prediction of water hammer phenomenon in two-phase systems, together with an original mechanistic approach for the prediction of phase transition rates, based on the shape and size of vapor-liquid interfacial area and the phase transition potential expressed through vapor and liquid phase temperature difference. Available water hammer experimental conditions were numerically simulated with the new modeling approach. Driving parameters of boiling and condensation rates at the steam-water interfaces are evaluated, and a good agreement is shown between numerical results and experimental data of bulk two-phase flow parameters during water hammer transients.