Abstract Closing and balancing Earth’s global water cycle remains a challenge for the climate community. Observations are limited in duration, global coverage, and frequency, and not all water cycle terms are adequately observed. Reanalyses aim to fill the gaps through the assimilation of as many atmospheric water vapor observations as possible. Former generations of reanalyses have demonstrated a number of systematic problems that have limited their use in climate studies, especially regarding low-frequency trends. This study characterizes the NASA Modern-Era Retrospective Analysis for Research and Applications version 2 (MERRA-2) water cycle relative to contemporary reanalyses and observations. MERRA-2 includes measures intended to minimize the spurious global variations related to inhomogeneity in the observational record. The global balance and cycling of water from ocean to land is presented, with special attention given to the water vapor analysis increment and the effects of the changing observing system. While some systematic regional biases can be identified, MERRA-2 produces temporally consistent time series of total column water and transport of water from ocean to land. However, the interannual variability of ocean evaporation is affected by the changing surface-wind-observing system, and precipitation variability is closely related to the evaporation. The surface energy budget is also strongly influenced by the interannual variability of the ocean evaporation. Furthermore, evaluating the relationship of temperature and water vapor indicates that the variations of water vapor with temperature are weaker in satellite data reanalyses, not just MERRA-2, than determined by observations, atmospheric models, or reanalyses without water vapor assimilation.