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Underestimation of precipitation in topographically complex regions plagues most gauge-based gridded precipitation datasets. Gauge locations are usually in or near population centers, which tend to lie at low elevations relative to the surrounding terrain. For hydrologic modeling purposes, the resulting bias can result in serious underprediction of observed flows. A hydrologic water balance approach to develop a globally consistent correction for the underestimation of gridded precipitation in mountainous regions is described The adjustment is based on a combination of the catchment water balances and variations of the Budyko EIP versus PET/F curve. The method overlays streamflow measurements onto watershed boundaries and then performs watershed water balances to determine "true" precipitation. Rather than relying on a modeled runoff ratio, evaporation is estimated using the Budyko curves. The average correction ratios for each of 357 mountainous river basins worldwide are spatially distributed across the basins and are then interpolated to ungauged areas. Following application of adjustments for precipitation catch deficiencies, the correction ratios are used to scale monthly precipitation from an existing monthly global dataset (1979-99, 0.5° resolution). The correction for orographic effects resulted in a net increase in global terrestrial precipitation of 6.2% (20.2% in orographically influenced regions only) for the 1979-99 climatology. The approach developed here is applicable to any precipitation dataset in regions where good streamflow data exist. As a cautionary note, the correction factors are dataset dependent, and therefore the adjustments are strictly applicable only to the data from which they were derived. [PUBLICATION ABSTRACT]