Fuel level sensors are used to indicate the amount of fuel in the tank of an automobile. The most common type of fuel level sensor is the float-arm sensor in which a float is connected to a resistance band via an arm. The fuel volume inside the tank sets the height of the float which in turn is converted to a resistance value. This resistance value is converted into gauge reading that is displayed on the dashboard. Whereas this method is widely popular due to its low cost and durability, fuel slosh phenomenon imposes a major challenge. The fuel slosh waves under numerous driving maneuvers impose dynamic drag/lift forces on the float which result into fluctuations in its position (i.e. float height). Under severe acceleration or braking maneuvers, the float can actually submerge inside the liquid and fail to predict location of the free surface. These fluctuations can cause erroneous fuel indication. This is especially critical at low fuel levels where such errors may have significant impact on Distance-to-Empty (DTE) estimations. Therefore, it is important to establish a CAE methodology to accurately predict effect of fuel slosh on motion of the float. This paper summarizes activities carried out by the fuel system team at Ford Motor Company to develop and validate such CAE methodology. The CAE method has been developed using commercial software: Star-CCM+. Fuel slosh is modeled using Eulerian multiphase VOF approach. Dynamic forces on the float and its resulting motion are modeled using a fluid-structure interaction method known as ‘Dynamic Fluid Body Interaction (DFBI)’. Motion of the float is captured using the moving mesh approach called ‘Overset Mesh’. Predictions of float height [h(t)] from simulation are compared with a vehicle test results and detailed discussion on CAE-test correlation is provided. Further discussion on best practices for such method is also included in this paper. In conclusion, the Fluid-Structure Interaction (FSI) method accurately predicts effect of fuel slosh and can be integrated in the product development process for evaluating effect of various tank features, baffles and float shapes to ensure a reliable fuel indication system.