We describe an alternative two-dimensional numerical model for the Lassen hydrothermal system. As in earlier models, the new model consists of a vertical upflow zone with a low permeability caprock near its top and a permeable horizontal channel that connects to the upflow zone at depth. The new model, however, also includes a recirculation region beneath the horizontal channel and a recharge zone. Magmatic heating is explicitly represented by specifying heat flows near the bottom of the upflow zone. Simulations show that a periodically appearing vapor-dominated zone, which sometimes consists of pure-steam, develops beneath the caprock and feeds steam-type discharges at high elevations, while the horizontal channel feeds the hot-spring discharge region at lower elevations. This model is able to reproduce the inferred ~1:1 discharge ratio between water and steam and to match estimates on current heat output from the system. The development of the vapor-dominated zone does not require dramatic changes in geohydrologic conditions. Our model also shows that both the vapor-dominated zone and the whole system evolve quasiperiodically with a period of ~103 years. These oscillations are related to the unstable two-phase hydrothermal fluid flow within the vapor-dominated zone. The observed high-frequency oscillations near the vapor-dominated zone superimposed on low frequency ones probably result from the oscillatory instability introduced by rapid changes in permeability of the low-permeability caprock. The results indicate that the system is probably still in a transient state. ¿ 1998 American Geophysical Union