Although, WAG has been studied and implemented widely for hydrocarbon recovery improvement, still there are some uncertainties regarding flow dynamics in the three-phase region. One of the most important uncertainty areas is modeling of three phase relative permeability in this region. Commercial simulators by using conventional three phase models cannot capture all the features and mechanisms behind the three phase flow. Hysteresis is one of the phenomenons, which is still remained controversial in three phase relative permeability models. Some of the current relative permeability models have accounted for this phenomenon and in others, hysteresis effect is lacking. Two phase models usually fail to predict the actual behavior of the hysteresis in three phase flow. Some of the three phase models also take in to account the features of hysteresis but not all of them. In the simulation process of water alternating gas, hysteresis modeling is a comer stone of the workflow. If this work step is not done properly, the results of the simulation study may not necessarily capture different aspects of the WAG injection scenario and the results could be mis-leading affecting the business decision. In this study, first an extensive parametric paper review and literature survey has been done on hysteretic two and three phase relative permeability models following by a comparative analysis. Parametric investigation is carried out and the advantages and disadvantages of the models are discussed. The model predictions versus selected experimental data are shown and the discrepancies are highlighted. The onset point to improve the model prediction is declared and finally to show the hysteresis effect on oil recovery a simulation case is done using a synthetic sector model. The discussion in this study show that by properly modeling the WAG process and taking into account the hysteresis phenomenon, the robustness of the results on incremental hydrocarbon recovery by WAG process can be significantly improved. It can be concluded that the simulation results using the commercial simulator can be mis-leading in term of the WAG injection performance if hysteresis modeling is not properly done and applied. Copyright 2011, International Petroleum Technology Conference.