AbstractThe global water and carbon cycles are greatly influenced by terrestrial vegetation, making trustworthy representations of dynamic biosphere–hydrosphere interactions a crucial component of both ecosystem and climate models. This paper comprehensively evaluates the hydrological performance of a leading dynamic global vegetation model Lund‐Potsdam‐Jena General Ecosystem Simulator (LPJ‐GUESS), using a broad range of the latest available global observation‐based gridded datasets that cover the main components of the hydrological cycle. Overall, we find that the hydrological components modelled by LPJ‐GUESS agree well with global gridded datasets of runoff, evapotranspiration and surface soil moisture, though there are discrepancies in some regions and periods. Furthermore, LPJ‐GUESS accurately captures both inter‐ and intra‐annual variations of runoff in most regions and catchment areas, including the Danube, Murray, Yangtze, Yenisei and Nile basins. Total evapotranspiration modelled by LPJ‐GUESS agrees closely with the evapotranspiration estimates of the Global Land Evaporation Amsterdam Model and PML‐V2 datasets, but with some disagreement in the individual components, especially for evaporation. The surface soil moisture simulated by LPJ‐GUESS aligns with ESA‐CCI (v5.3) surface soil moisture datasets in most regions, with greatest discrepancies in subarctic areas. We attribute these discrepancies to two main sources: (1) absent or poor representation of processes such as river routing, storage and supply of water bodies, and cropland irrigation; and (2) uncertainties in both reference datasets and input to the model, including precipitation, soil texture, and land use.