This study assesses four Satellite-derived Precipitation Products (SPPs) that are corrected and validated against gauge data such as Soil Moisture to Rain—Advanced SCATterometer V1.5 (SM2RAIN-ASCAT), Multi-Source Weighted-Ensemble Precipitation V2.8 (MSWEP), Global Precipitation Measurement Integrated Multi-satellitE Retrievals for GPM Final run V6 (GPM IMERGF), and Climate Hazards Group InfraRed Precipitation with Station (CHIRPS). We evaluate the performance of these SPPs in Nepal’s Myagdi Khola watershed, located in the Kali Gandaki River basin, for the period 2009–2019. The SPPs are evaluated by validating the gridded precipitation products using the hydrological model, Soil and Water Assessment Tool (SWAT). The results of this study show that the SM2RAIN-ASCAT and GPM IMERGF performed better than MSWEP and CHIRPS in accurately simulating daily and monthly streamflow. GPM IMERGF and SM2RAIN-ASCAT are found to be the better-performing models, with higher NSE values (0.63 and 0.61, respectively) compared with CHIRPS and MSWEP (0.45 and 0.41, respectively) after calibrating the model with monthly data. Moreover, SM2RAIN-ASCAT demonstrated the best performance in simulating daily and monthly streamflow, with NSE values of 0.57 and 0.63, respectively, after validation. This study’s findings support the use of satellite-derived precipitation datasets as inputs for hydrological models to address the hydrological complexities of mountainous watersheds.