Using collocated ERS scatterometer (ESCAT), Tropical Rainfall Measuring Mission (TRMM) Precipitation Radar (PR), and European Centre for Medium-Range Weather Forecasts (ECMWF) data, the effects of rain on ESCAT wind-only retrieval are evaluated. Additional scattering from rain causes estimated wind speeds to appear higher than expected. Selected directions of the rain-corrupted wind vectors are biased toward along-track directions under conditions of heavy rain, which is regardless of the true wind direction. Rain becomes more significant for data acquired at a high incidence angle. To compensate for rain-induced backscatter, a simultaneous wind/rain retrieval (SWRR) method, which simultaneously retrieves wind velocity and surface rain rate from ESCAT measurements with an incidence angle >40deg, is developed by using a C-band wind/rain backscatter model. The performance of SWRR under typical wind/rain conditions is evaluated through simulation and validation with collocated TRMM PR and ECMWF data sets. SWRR is shown to significantly improve wind velocity estimates, and the SWRR estimated surface rain rate has relatively high accuracy in moderate to heavy rain cases. Although SWRR-retrieved rain is somewhat biased, it can be corrected. We note that for ESCAT, about 1.5% of all the collocated measurements is affected by significant rain.