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In 2009, the University of Alabama-Huntsville configured their GOES satellited-based solar radiation product to include Puerto Rico, the US Virgin Islands (USVI), Dominican Republic, Haiti, Jamaica, and Cuba. The half-hourly and daily integrated data are available at 1 km resolution for Puerto Rico and the USVI and 2 km for Hispaniola, Jamaica, and Cuba. These data made it possible to implement estimates of satellite radiation-based evapotranspiration methods on all of the islands. The use of the solar radiation data in combination with estimates of other climate parameters facilitated the development of a water and energy balance algorithm for Puerto Rico. The purpose of this paper is to describe the theoretical background and technical approach for estimating the components of the daily water and energy balance. The operational water and energy balance model is the first of its kind in Puerto Rico. Model validation results are presented for reference and actual evapotranspiration, soil moisture, and streamflow. Mean errors for all analyses were less than 7%. The water and energy balance model results can benefit such diverse fields as agriculture, ecology, coastal water management, human health, renewable energy development, water resources, drought monitoring, and disaster and emergency management. This research represents a preliminary step in developing a suite of gridded hydro-climate products for the Caribbean Region.