The processes controlling the global distribution of precipitation and atmospheric water vapor are studied using the Commonwealth Scientific and Industrial Research Organisation Mark 2 general circulation model (GCM), which includes a semi-Lagrangian transport of water vapor. The precipitation rate, P, water column, W, and horizontal moisture fluxes, averaged over the months of January and July from a 30-year present climate simulation compare well with observations. Influences on these quantities are discussed. The convergence of the moisture flux is described here as a dynamic influence on both P and W. The (monthly) mean-flow component of the flux converges on the tropical maxima of both fields. The transient-flow flux is important in the middle and high latitudes. A two-dimensional eddy-flux theory is proposed for this component, in which the flux is influenced by the gradient of W and by the variance of the winds at 800 hPa. Possible changes in the hydrological cycle due to climate change are explored by examining the equilibrium doubled CO2 climate simulated by the GCM. The hydrological cycle is enhanced by the thermodynamic effect, with the annual mean precipitation and evaporation increased by 10% and the mean water column increased by 29%. Dynamic effects are also important. Changes in both the mean winds and the water column are important to the mean-flow flux convergence. Midlatitude transient fluxes typically increase, but the effect of the increased gradients of W is partially countered by decreases in wind variance. It is concluded that the causes of any future precipitation changes are likely to be complex.