The seasonal, spatial, and latitudinal variability of precipitation (P), evapotranspiration (E), and runoff (R) are examined for large Arctic river basins and for the entire pan-Arctic domain using a 21-year off-line simulation of the Variable Infiltration Capacity (VIC) macroscale hydrology model and the ERA-40 reanalysis. Observed P used in the VIC model (corrected for gauge catch deficiency) is compared with that from the ERA-40 reanalysis. Gridded values of evapotranspiration minus precipitation (E-P) are calculated from the ERA-40 atmospheric water budget, and estimates of implied E are obtained as the residual of observed P and ERA-40 E-P. The ERA-40 P is surprisingly close to observations on an annual basis over the large river basins (especially accounting for known errors in the observations). Furthermore, ERA-40 P is quite consistent with observations in terms of interannual, spatial, and latitudinal variations. ERA-40 E is generally higher than both VIC E and implied E in spring and autumn. However, VIC estimates more E in June and July than either ERA-40 or the atmospheric budget for the Yenisei, Ob, and Mackenzie River basins. The ERA-40 bias toward early snowmelt and a double runoff peak (not present in VIC or observations) indicates the need for improvements in the ECMWF land surface scheme. The long-term means of ERA-40 vapor convergence P-E for the Lena, Yenisei, Ob, and Mackenzie are not in balance with observed runoff, mainly due to the uncertainties in computed P-E and observed streamflow.