<p>We investigate the interannual and interdecadal hydrological changes in the Amazon river basin and its sub-basins during 1980–2015 period, using GRACE satellite data and a physically-based, 2-km grid continental scale hydrological model (Leaf-Hydro-Flood) that incorporates a prognostic groundwater scheme and the effects of land use land cover change (LULC). The analyses focus on the dominant mechanisms that modulate terrestrial water storage (TWS) variations and droughts. Our results indicate that (1) the model simulates the basin-averaged TWS variations remarkably well, however, disagreements are observed in spatial patterns of temporal trends for post-2008 period, (2) the 2010s is the driest period since 1980, characterized by a major shift in decadal mean compared to 2000s due to the increased frequency of droughts, (3) long-term trends in TWS suggests that the Amazon as a whole is getting wetter (1.13 mm/y), but its southern and south-eastern sub-basins are facing significant negative TWS trends, caused primarily by intensified LULC changes, (4) increasing divergence between dry season total water deficit (TWD) and TWS release (TWS-R) suggest a strengthening dry season, especially in the southern and south-eastern sub-basins, and (5) the sub-surface storage regulates the propagation of meteorological droughts into hydrological droughts by strongly modulating TWS release with respect to its storage preceding the drought condition. Our simulations provide crucial insight on the importance of sub-surface storage in alleviating surface water deficit across Amazon and open pathways for improving prediction and mitigation of extreme droughts under changing climate and increasing hydrologic alterations due to human activities (e.g., LULC change).</p>