Abstract: Fifteen monthly gravity field solutions from the GRACE twin satellites launched more than two years ago have been studied to estimate gravity field changes between 2002 and 2003.The results demonstrate that GRACE is capable of capturing the changes in ground water on inter-annual scales with an accuracy of 0.4 ?Gal corresponding to 9 mm water thickness on spatial scales longer than 1300 km. Four of the most widely used global hydrological models have been investigated for their spatial comparison with GRACE observations of inter-annual gravity field variations due to changes in continental water storage. The Global Land Data Assimilation System model has a spatial correlation coefficient with GRACE observations of 0.65 over the northern hemisphere. This demonstrates that the observed gravity field changes on these scales are largely related to changes in continental water storage.