AbstractNortheastern Brazil is hydrologically characterized by recurrent droughts leading to a highly vulnerable natural water resource system. The region contains the Caatinga biome, covering an area of approximately 800 000 km2. To increase insight in water balance components for this sparsely studied ecosystem, hydrology simulations were performed with the SWAP (Soil Water Atmosphere Plant) model for a Caatinga basin of 12 km2. SWAP model was developed to simulate hydrology under short‐cycle crops, and its parameterization and validation to a diverse ecosystem is a novelty. The validation of the simulations was performed using a dataset of daily soil water content measurements taken at 0.2 m depth in three sites in the basin in the period from 2004 to 2012. Average Nash–Sutcliffe efficiency coefficient for these simulations was 0.57 and root mean square error of prediction was 4.3%. The results of the simulations suggest that water components do not diverge statistically among different sites of the biome. The Caatinga biome returns 75% (±17%) of the annual precipitation to the atmosphere, whereas the partitioning of total evapotranspiration into its components (transpiration, evaporation and interception) on annual basis accounts for 41% (±7%), 40% (±6%) and 19% (±3%) respectively. Regarding water availability, the surface soil layer (0.0–0.2 m) is the most important layer in the rooted profile, supplying up to 90% of atmospheric water demand. According to our analysis performed on daily basis, evapotranspiration and air temperature are most sensitive to soil moisture during the periods June–September and December–January. Copyright © 2016 John Wiley & Sons, Ltd.