This paper describes the third full release of the Rossby Centre Regional Climate model (RCA3), with an emphasis on changes compared to earlier versions, in particular the introduction of a new tiled land-surface scheme. The model performance over Europe when driven at the boundaries by ERA40 reanalysis is discussed and systematic biases identified. This discussion is performed for key near-surface variables, such as temperature, precipitation, wind speed and snow amounts at both seasonal and daily timescales. An analysis of simulated clouds and surface turbulent and radiation fluxes is also made, to understand the causes of the identified biases. RCA3 shows equally good, or better, correspondence to observations than previous model versions at both analysed timescales. The primary model bias relates to an underestimate of the diurnal surface temperature range over Northern Europe, which maximizes in summer. This error is mainly linked to an overestimate of soil heat flux. It is shown that the introduction of an organic soil component reduces the error significantly. During the summer season, precipitation and surface evaporation are both overestimated over Northern Europe, whereas for most other regions and seasons precipitation and surface turbulent fluxes are well simulated.