Article first published online: 17 JUN 2009. Leaf area index (LAI) is a key physical variable which controls the exchange of water and CO₂ between the earth and the atmosphere. Recent improvements in the quality of satellite-derived estimates of LAI, specifically the MODIS LAI product, have led to increased confidence in their operational use. In this study, we examined the relationship amongst MODIS LAI (Collection 5), pre-dawn leaf water potential (Ψpd) (a surrogate for plant water availability), vegetation water use (ET) and pan evaporation (E₀) in forest, evergreen woodland, open shrubland and savanna in Australia. We present three models which demonstrate how the MODIS LAI product can be used to make spatially explicit predictions of the state of three key physical variables, namely Ψpd, the aridity index and vegetation water use. The LAI-Ψpd model explains how plant available soil moisture can be predicted at a continental scale for intact forests, woodlands and savannas. In a similar manner, the aridity index (mean annual rainfall/E₀ ) shows a powerful relationship with the MODIS LAI values. Using vegetation water use data from 16 field campaigns and published studies, we developed a MODIS LAI-ET model that provides the ability to predict both site and catchment-scale annual evapotranspiration. We test the model against independent estimates of site and catchment-scale vegetation water use.