Understanding the role of reservoirs in the terrestrial water cycle is critical to support the sustainable management of water resources especially for China where reservoirs have been extensively built nationwide. However, this has been a scientific challenge due to the limited availability of continuous, long‐term reservoir operation records at large scales, and a process‐based modeling tool to accurately depict reservoirs as part of the terrestrial water cycle is still lacking. Here, we develop a continental‐scale land surface‐hydrologic model over the mainland China by explicitly representing 3,547 reservoirs in the model with a calibration‐free conceptual operation scheme for ungauged reservoirs and a hydrodynamically based two‐way coupled scheme. The model is spatially calibrated and then extensively validated against streamflow observations, reservoir storage observations and GRACE‐based terrestrial water storage anomalies. A 30‐year simulation is then performed to quantify the seasonal dynamics of China’s reservoir water storage (RWS) and its role in China's terrestrial water storage (TWS) over recent decades. We estimate that, over a seasonal cycle, China's RWS variation is 15%, 16%, and 25% of TWS variation during 1981–1990, 1991–2000, and 2001–2010, respectively, and one‐fifth of China’s reservoir capacity are effectively used annually. In most regions, reservoirs play a growing role in modulating the water cycle over time. Despite that, an estimated 80 million people have faced increasing water resources challenges in the past decades due to the significantly weakened reservoir regulation of the water cycle. Our approaches and findings could help the government better address the water security challenges under environmental changes.

Regional precipitation recycling is the measure of the contribution of local evaporation E to local precipitation. This study provides a set of two methods developed in the Weather Research and Forecasting WRF model system for investigating regional precipitation recycling mechanisms: (1) tracking of tagged atmospheric water species originating from evaporation in a source region, ie E‐tagging, and (2) three‐dimensional budgets of total and tagged atmospheric water species. These methods are used to quantify the effect of return flow and nonwell vertical mixing neglected in the computation of the bulk precipitation recycling ratio. The developed algorithms are applied to a WRF simulation of the West African Monsoon 2003. The simulated region is characterized by vertical wind shear condition, i.e., southwesterlies in the low levels and easterlies in the mid‐levels, which favors return flow and nonwell vertical mixing. Regional precipitation recycling is investigated in 100 × 100 and 1000 × 1000 km² areas. A prerequisite condition for evaporated water to contribute to the precipitation process in both areas is that it is lifted to the mid‐levels where hydrometeors are produced. In the 100 × 100 (1000 × 1000) km² area the bulk precipitation recycling ratio is 0.9 (7.3) %. Our budget analysis reveals that return flow and nonwell vertically mixed outflow increase this value by about +0.2 (2.9) and +0.2 (1.6) %, respectively, thus strengthening the well‐known scale‐dependency of regional precipitation recycling.