This paper describes the development and validation of a water balance model of the Upper Blue Nile in Ethiopia. A major requirement of any modelling attempt is the availability of climatic and hydrological data. However, for the Upper Blue Nile, only a limited number of observation sites are available over a very large area. As a result, the model described here is a grid-based water balance model which requires limited data inputs, few parameters and runs on a monthly time-step. Climate is dominated by the influence of elevation in the river basin. Estimates of potential evapotranspiration (PE) and rainfall are predicted for 10-minute resolution grid cells for input to the model. These estimates are based on multiple regression models using latitude, longitude and elevation. In the basin, annual mean PE and rainfall range, with increasing elevation, from 1800 mm to 1200 mm and 924 mm to 1845 mm, respectively. In the model, vegetation cover is not explicitly treated and soil characteristics are spatially invariant. The model is calibrated to reproduce mean monthly runoff over a 37-year period (1953–1987), and validated by its ability to simulate sub-catchment runoff and historical variations in Blue Nile runoff. The key factor that determines model performance is the quality of the rainfall inputs, with the best results obtained with a time series comprised of long, good quality station data. Over a 76-year period the correlation between observed and simulated annual flows was 0.74 and the mean error was 14%, although fairly large errors occurred in individual years. Considering the paucity of data for the basin, these results are encouraging. The model is used to investigate spatial variability in the sensitivity of runoff to changes in rainfall and PE. The sensitivity is greatly affected by the runoff ratio of the model grid cells and it increases as grid cell runoff ratio decreases. The sensitivity is also affected by the seasonal distribution of rainfall. The paper ends with a discussion of the model's performance and its potential for future development.