Description: So far, various studies have aimed at decomposing the integrated terrestrial water storage variations observed by satellite gravimetry (GRACE, GRACE-FO) with the help of large-scale hydrological models. While the results of the storage decomposition depend on model structure, little attention has been given to the impact of the way that vegetation is represented in these models. Although vegetation structure and activity represent the crucial link between water, carbon, and energy cycles, their representation in large-scale hydrological models remains a major source of uncertainty. At the same time, the increasing availability and quality of Earth-observation-based vegetation data provide valuable information with good prospects for improving model simulations and gaining better insights into the role of vegetation within the global water cycle. In this study, we use observation-based vegetation information such as vegetation indices and rooting depths for spatializing the parameters of a simple global hydrological model to define infiltration, root water uptake, and transpiration processes. The parameters are further constrained by considering observations of terrestrial water storage anomalies (TWS), soil moisture, evapotranspiration (ET) and gridded runoff (Q) estimates in a multi-criteria calibration approach. We assess the implications of including varying vegetation characteristics on the simulation results, with a particular focus on the partitioning between water storage components. To isolate the effect of vegetation, we compare a model experiment in which vegetation parameters vary in space and time to a baseline experiment in which all parameters are calibrated as static, globally uniform values. Both experiments show good overall performance, but explicitly including varying vegetation data leads to even better performance and more physically plausible parameter values. The largest improvements regarding TWS and ET are seen in supply-limited (semi-arid) regions and in the tropics, whereas Q simulations improve mainly in northern latitudes. While the total fluxes and storages are similar, accounting for vegetation substantially changes the contributions of different soil water storage components to the TWS variations. This suggests an important role of the representation of vegetation in hydrological models for interpreting TWS variations. Our simulations further indicate a major effect of deeper moisture storages and groundwater–soil moisture–vegetation interactions as a key to understanding TWS variations. We highlight the need for further observations to identify the adequate model structure rather than only model parameters for a reasonable representation and interpretation of vegetation–water interactions.