The paper presents a data-driven approach to the modelling and forecasting of hydrological systems based on nonlinear time-series analysis. Time varying parameters are estimated using a combined Kalman filter and fixed-interval-smoother, and state-dependent parameter relations are identified leading to nonlinear extensions to common time-series models such as the autoregressive exogenous (ARX) and general transfer function (TF). This nonlinear time-series technique is used as part of a data-based mechanistic modelling methodology where models are objectively identified from the data, but are only accepted as a reasonable representation of the system if they have a valid mechanistic interpretation. To this end it is shown that the TF model c...