We present a quantitative approach for measuring hydrological drought occurrence and severity based on terrestrial water storage observations from NASA's Gravity Recovery and Climate Experiment (GRACE) satellite mission. GRACE measurements are applied by calculating the magnitude of the deviation of regional, monthly terrestrial water storage anomalies from the time series' monthly climatology, where negative deviations represent storage deficits. Monthly deficits explicitly quantify the volume of water required to return to normal water storage conditions. We combine storage deficits with event duration to calculate drought severity. Drought databases are referenced to identify meteorological drought events in the Amazon and Zambezi River basins and the southeastern United States and Texas regions. This storage deficit method clearly identifies hydrological drought onset, end, and duration; quantifies instantaneous severity and peak drought magnitude; and compares well with the meteorological drought databases. It also reveals information about the hydrological effects of meteorological drought on regional water storage.