The first aim of the present paper is the determination of the magnitude, annual variation and spatial distribution of skill in seasonal hindcasts of runoff and discharge in the entire continent of South America. We evaluated 35 years of hindcasts generated with the Variable Infiltration Capacity (VIC) hydrological model forced with SEAS5 hindcasts. Initial conditions of terrestrial water and so-called pseudo-observations were computed with a reference (i.e. historic) simulation. Skill was determined with monthly temporal resolution for the entire annual cycle and mostly using the pseudo-observations for verification. The second aim of the paper is the explanation of skill in terms of its sources, namely meteorological forcing and the initial conditions. Therefore, two sets of restricted hindcasts, which isolate the sources of skill, were analysed. The SEAS5 precipitation hindcasts exhibit significant skill even at the longest lead times (7 months). Beyond the first lead month we found significant skill in 13–43 % of the grid cells, depending on target and lead month. Levels of skill are higher in the full hindcasts (significant skill in 31–89 % of the grid cells). At the continental scale more of the skill is caused by the forcing than by the initial conditions. The runoff hindcasts are skilful in large parts of the continent. In a 1000 km wide band along the north coast of the continent and in southeast South America, most of the skill is due to the forcing. A typical feature of these regions is an increase of skill with lead time during specific parts of the year, which is against the common tendency. In Argentina and north Chile most of the skill in the runoff hindcasts can be attributed to the initial conditions of soil moisture. Verification with real observations of discharge broadly confirmed the skill pattern obtained with pseudo-observations.