We investigated the Rossby Centre regional climate model, RCA3, and its ability to reproduce the water budget of the Baltic Sea drainage basin during the period from 1979 to 2002. The model was forced on its lateral boundaries with European Centre for Medium-Range Weather Forecasts Re-Analysis data, ERA40. Simulated long-term means and inter-annual variability were compared with observational records and model-derived data. The basin-wide water fluxes were broadly captured by the model, and annual mean net precipitation over land agreed well (i.e., within 5%) with observed total discharge to the Baltic Sea. Long-term annual means of precipitation were around 20% higher in RCA3 compared with reference data, the differences being in most months statistically significant at the 5% level. On the other hand, differences between the reference datasets were evident and in most months also statistically significant. The inclusion of a high-resolution dataset showed a close agreement compared with RCA3; differences were less than 5% in the long-term annual mean. Therefore, more high-resolution observational datasets, especially for evaporation and runoff, are required to refine the water budget and compare water fluxes on sub-regional and local scales.