The construction of hydropower dams is a common strategy to support a country's increasing need for electricity and river water management for industry and agriculture. Although the hydrological and geophysical impacts of water relocation are usually assessed prior to impoundment, their accuracy is generally limited due to the lack of in situ observations, especially in a remote area. This study presents a workflow to quantify the terrestrial water storage change (∆TWS) and land subsidence induced by a reservoir's water impoundment using multiple satellite observations (GRACE, Landsat), land surface models (CABLE, GLDAS, NCEP, ECMWF), and GPS data. The study site is the Bakun Dam, located in Sarawak, Malaysia, which is the largest hydropower dam in Southeast Asia. Commencing operation in late 2010, the dam induced a change of water mass and lake surface area that was clearly observed by GRACE and Landsat observations, respectively. During the 17-month impounding period (from August 2010 to December 2011), GRACE observed a dramatic increase of approximately 200 mm equivalent water height, while Landsat detected an increased lake extent of around 600 km2. In this paper, a forward model is developed to determine the increased water surface level corresponding to GRACE observations, estimated to be about 120 m. In contrast to GRACE, the TWS derived from land surface models cannot capture the increased ΔTWS, due to the lack of reservoir routing algorithms in the models. In addition, the land subsidence was calculated using the disk load model constructed based on the GRACE-derived lake level and Landsat-derived lake extent; the result is validated with the GPS data from BIN1 station, located at the western coast of Borneo. The commencement stage of the Bakun Dam induces the large-scale land subsidence, which causes the GPS-BIN1 station to subside by ~9 mm, and move toward the Bakun Lake by ~4 mm. Computation of the surface displacements directly from GRACE spherical harmonic coefficient data fails to capture the subsidence feature, mainly due to the truncation error. Overall, this study demonstrates that evaluating GRACE in conjunction with Landsat, LSMs, and GPS data allows the exploitation of the gravity signal at a much smaller spatial scale than its intrinsic resolution. Benefiting from global coverage, the newly developed satellite-based algorithm is a valuable tool for assessing the impacts of reservoir operation on hydrological and geophysical changes from local to regional scales.