Texas experienced the most extreme one-year drought on record in 2011 with precipitation at 40% of long-term mean and agricultural losses of ~$7.6 billion. We assess the value of Gravity Recovery and Climate Experiment (GRACE) satellite-derived total water storage (TWS) change as an alternative remote sensing-based drought indicator, independent of traditional drought indicators based on in situ monitoring. GRACE shows depletion in TWS of 62.3 ± 17.7 km3 during the 2011 drought. Large uncertainties in simulated soil moisture storage depletion (14–83 km3) from six land surface models indicate that GRACE TWS is a more reliable drought indicator than disaggregated soil moisture or groundwater storage. Groundwater use and groundwater level data indicate that depletion is dominated by changes in soil moisture storage, consistent with high correlation between GRACE TWS and the Palmer Drought Severity Index. GRACE provides a valuable tool for monitoring statewide water storage depletion, linking meteorological and hydrological droughts.