The geological record of landforms and sediments produced beneath deglaciating ice sheets offers insights into inaccessible glacial processes. Large subglacial valleys formed by meltwater erosion of sediments (tunnel valleys) are widespread in formerly glaciated regions such as the North Sea. Obtaining a better understanding of these features may help with the parameterisation of basal melt rates and the interplay between basal hydrology and ice dynamics in numerical models of past, present, and future ice-sheet configurations. However, the mechanisms and timescales over which tunnel valleys form remain poorly constrained. Here, we present a series of numerical modelling experiments, informed by new observations from high-resolution 3D seismic data (6.25 m bin size, ∼4 m vertical resolution), which test different hypotheses of tunnel valley formation and calculate subglacial water routing, seasonal water discharges, and the rates at which tunnel valleys are eroded beneath deglaciating ice sheets. Networks of smaller or abandoned channels, pervasive slump deposits, and subglacial landforms are imaged inside and at the base of larger tunnel valleys, indicating that these tunnel valleys were carved through the action of migrating smaller channels within tens of kilometres of the ice margin and were later widened by ice-contact erosion. Our model results imply that the drainage of extensive surface meltwater to the ice-sheet bed is the dominant mechanism responsible for tunnel valley formation; this process can drive rapid incision of networks of regularly spaced subglacial tunnel valleys beneath the fringes of retreating ice sheets within hundreds to thousands of years during deglaciation. Combined, our observations and modelling results identify how tunnel valleys form beneath deglaciating mid-latitude ice sheets and have implications for how the subglacial hydrological systems of contemporary ice sheets may respond to sustained climate warming.