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Quantification of spatially and temporally resolved water flows and water storage variations for all land areas of the globe is required to assess water resources, water scarcity and flood hazards, and to understand the Earth system. This quantification is done with the help of global hydrological models (GHMs). What are the challenges and prospects in the development and application of GHMs? Seven important challenges are presented. (1) Data scarcity makes quantification of human water use difficult even though significant progress has been achieved in the last decade. (2) Uncertainty of meteorological input data strongly affects model outputs. (3) The reaction of vegetation to changing climate and CO2 concentrations is uncertain and not taken into account in most GHMs that serve to estimate climate change impacts. (4) Reasons for discrepant responses of GHMs to changing climate have yet to be identified. (5) More accurate estimates of monthly time series of water availability and use are needed to provide good indicators of water scarcity. (6) Integration of gradient-based groundwater modelling into GHMs is necessary for a better simulation of groundwater-surface water interactions and capillary rise. (7) Detection and attribution of human interference with freshwater systems by using GHMs are constrained by data of insufficient quality but also GHM uncertainty itself. Regarding prospects for progress, we propose to decrease the uncertainty of GHM output by making better use of in situ and remotely sensed observations of output variables such as river discharge or total water storage variations by multi-criteria validation, calibration or data assimilation. Finally, we present an initiative that works towards the vision of hyper resolution global hydrological modelling where GHM outputs would be provided at a 1-km resolution with reasonable accuracy.