Floodplain inundation links river and land systems through significant water, sediment, and nutrient exchanges. However, these two‐way interactions between land and river are currently missing in most Earth System Models. In this study, we introduced the two‐way hydrological coupling between the land component, E3SM Land Model, and the river component, Model for Scale Adaptive River Transport, in Energy Exascale Earth System Model (E3SM) to study the impacts of floodplain inundation on land and river processes. We calibrated the river channel geometry and developed a new data‐driven inundation scheme to improve the simulation of inundation dynamics in E3SM. The new inundation scheme captures 96% of the spatial variation of inundation area in a satellite inundation product at global scale, in contrast with 7% when the default inundation scheme of E3SM was used. Global simulations including the new inundation scheme performed at resolution with and without land‐river two‐way coupling was used to quantify the impact of coupling. Comparisons show that two‐way coupling modifies the water and energy cycle in 20% of the global land cells. Specifically, riverine inundation is reduced by two‐way coupling, but inland inundation is intensified. Wetter periods are more impacted by the two‐way coupling at the global scale, while regions with different climates exhibit different sensitivities. The two‐way exchange of water between the land and river components of E3SM provides the foundation for enabling two‐way coupling of land‐river sediment and biogeochemical fluxes. These capabilities will be used to improve understanding of the interactions between water and biogeochemical cycles and their response to human perturbations.