At the one-cell stage, the C. elegans embryo becomes polarized along the anterior-posterior axis. The PAR proteins form complementary anterior and posterior domains in a dynamic process driven by cytoskeletal rearrangement. Initially, the PAR proteins are uniformly distributed throughout the embryo. After a cue from fertilization, cortical actomyosin contracts toward the anterior pole. PAR-3/PAR-6/PKC-3 (the anterior PAR proteins) become restricted to the anterior cortex. PAR-1 and PAR-2 (the posterior PAR proteins) become enriched in the posterior cortical region. We present a mathematical model of this polarity establishment process, in which we take a novel approach to combine reaction-diffusion dynamics of the PAR proteins coupled to a simple model of actomyosin contraction. We show that known interactions between the PAR proteins are sufficient to explain many aspects of the observed cortical PAR dynamics in both wild-type and mutant embryos. However, cytoplasmic PAR protein polarity, which is vital for generating daughter cells with distinct molecular components, cannot be properly explained within such a framework. We therefore consider additional mechanisms that can reproduce the proper cytoplasmic polarity. In particular we predict that cytoskeletal asymmetry in the cytoplasm, in addition to the cortical actomyosin asymmetry, is a critical determinant of PAR protein localization.