The objective of this study is to propose and test a new procedure to improve the validation of remote-sensing, high-resolution precipitation estimates. Our recent studies show that many conventional validation measures do not accurately capture the unique error characteristics in precipitation estimates to better inform both data producers and users. The proposed new validation procedure has two steps: 1) an error decomposition approach to separate the total retrieval error into three independent components: hit error, false precipitation and missed precipitation; and 2) the hit error is further analyzed based on a multiplicative error model. In the multiplicative error model, the error features are captured by three model parameters. In this way, the multiplicative error model separates systematic and random errors, leading to more accurate quantification of the uncertainties. The proposed procedure is used to quantitatively evaluate the recent two versions (Version 6 and 7) of TRMM’s Multi-sensor Precipitation Analysis (TMPA) real-time and research product suite (3B42 and 3B42RT) for seven years (2005–2011) over the continental United States (CONUS). The gauge-based National Centers for Environmental Prediction (NCEP) Climate Prediction Center (CPC) near-real-time daily precipitation analysis is used as the reference. In addition, the radar-based NCEP Stage IV precipitation data are also model-fitted to verify the effectiveness of the multiplicative error model. The results show that winter total bias is dominated by the missed precipitation over the west coastal areas and the Rocky Mountains, and the false precipitation over large areas in Midwest. The summer total bias is largely coming from the hit bias in Central US. Meanwhile, the new version (V7) tends to produce more rainfall in the higher rain rates, which moderates the significant underestimation exhibited in the previous V6 products. Moreover, the error analysis from the multiplicative error model provides a clear and concise picture of the systematic and random errors, with both versions of 3B42RT have higher errors in varying degrees than their research (post-real-time) counterparts. The new V7 algorithm shows obvious improvements in reducing random errors in both winter and summer seasons, compared to its predecessors V6. Stage IV, as expected, surpasses the satellite-based datasets in all the metrics over CONUS. Based on the results, we recommend the new procedure be adopted for routine validation of satellite-based precipitation datasets, and we expect the procedure will work effectively for higher resolution data to be produced in the Global Precipitation Measurement (GPM) era.