This review surveys current and emerging drought monitoring approaches using satellite remote sensing observations from climatological and ecosystem perspectives. We argue that satellite observations not currently used for operational drought monitoring, such as near‐surface air relative humidity data from the Atmospheric Infrared Sounder mission, provide opportunities to improve early drought warning. Current and future satellite missions offer opportunities to develop composite and multi‐indicator drought models. While there are immense opportunities, there are major challenges including data continuity, unquantified uncertainty, sensor changes, and community acceptability. One of the major limitations of many of the currently available satellite observations is their short length of record. A number of relevant satellite missions and sensors (e.g., the Gravity Recovery and Climate Experiment) provide only a decade of data, which may not be sufficient to study droughts from a climate perspective. However, they still provide valuable information about relevant hydrologic and ecological processes linked to this natural hazard. Therefore, there is a need for models and algorithms that combine multiple data sets and/or assimilate satellite observations into model simulations to generate long‐term climate data records. Finally, the study identifies a major gap in indicators for describing drought impacts on the carbon and nitrogen cycle, which are fundamental to assessing drought impacts on ecosystems.

The reliability of standard meteorological drought indices based on measurements of precipitation is limited by the spatial distribution and quality of currently available rainfall data. Furthermore, they reflect only one component of the surface hydrologic cycle, and they cannot readily capture nonprecipitation-based moisture inputs to the land surface system (e.g., irrigation) that may temper drought impacts or variable rates of water consumption across a landscape. This study assesses the value of a new drought index based on remote sensing of evapotranspiration (ET). The evaporative stress index (ESI) quantifies anomalies in the ratio of actual to potential ET (PET), mapped using thermal band imagery from geostationary satellites. The study investigates the behavior and response time scales of the ESI through a retrospective comparison with the standardized precipitation indices and Palmer drought index suite, and with drought classifications recorded in the U.S. Drought Monitor for the 2000–09 growing seasons. Spatial and temporal correlation analyses suggest that the ESI performs similarly to short-term (up to 6 months) precipitation-based indices but can be produced at higher spatial resolution and without requiring any precipitation data. Unique behavior is observed in the ESI in regions where the evaporative flux is enhanced by moisture sources decoupled from local rainfall: for example, in areas of intense irrigation or shallow water table. Normalization by PET serves to isolate the ET signal component responding to soil moisture variability from variations due to the radiation load. This study suggests that the ESI is a useful complement to the current suite of drought indicators, with particular added value in parts of the world where rainfall data are sparse or unreliable.