The Soil and Water Assessment Tool (SWAT) uses the popular Curve Number (CN) method to determine the respective amounts of infiltration and surface runoff. While appropriate for engineering design in temperate climates, the CN is less than ideal in monsoonal climates and areas dominated by variable source area hydrology. The CN methodology is based on the assumption that there is a unique relationship between the average moisture content and the CN for all hydrologic response units, a questionable assumption in many regions. Rather than using the CN routine to predict runoff in SWAT, a physically based water balance was added to the code base. To compare this new water balance SWAT (SWAT-WB) to the original CN based SWAT (SWAT-CN), two watersheds were initialized: one in the headwaters of the Blue Nile in Ethiopia and one in the Catskill Mountains of New York State. SWAT-WB’s streamflow predictions were significantly better than SWAT-CN in the Ethiopian watershed with validation period NashSutcliffe efficiencies of 0.76 and 0.67, respectively. SWAT-WB performed better during calibration than SWAT-CN (NSE of 0.64 and 0.43, respectively) in the Catskills, but was not as accurate during validation (NSE of 0.52 and 0.62, respectively). While SWAT-WB was generally at least as accurate, if not more so, than SWAT-CN at the watershed outlets, it provided much more realistic spatial distribution of runoff producing areas. These results suggest that replacement of the CN with a water balance routine in SWAT: significantly improves model predictions in monsoonal climates, provides equally acceptable levels of accuracy under more typical US conditions, while at the same time greatly improving the ability to predict spatial distribution of runoff contributing areas.