Disclosed is a modular building construction having interlocking wall panels that mate with one another and with the frame of the building unit without screws, bolts or other fasteners, but while ensuring a water-tight fit. This configuration significantly simplifies installation of the wall panels into the skeletal frame of the modular building unit, allowing a first wall panel to be joined to an adjacent wall panel in a quick and easy installation step while maintaining the ability to later adjust and/or replace the wall panel.