We characterize how regional watersheds function as simple, dynamic systems through a series of hysteresis loops. These loops illustrate the temporal relationship between runoff and terrestrial water storage using measurements from NASA's Gravity Recovery and Climate Experiment (GRACE) satellites in three regional-scale watersheds (>150 000 km2) of the Columbia River Basin, USA and Canada. The direction of the hystereses for the GRACE signal move in opposite directions from the isolated groundwater hystereses, suggesting that regional scale watersheds require soil water storage to reach a certain threshold before groundwater recharge and peak runoff occur. While the physical processes underlying these hystereses are inherently complex, the vertical integration of terrestrial water in the GRACE signal encapsulates the processes that govern the non-linear function of regional-scale watersheds. We use this process-based understanding to test how GRACE data can be applied prognostically to predict seasonal runoff (mean R2 of 0.91) and monthly runoff (mean R2 of 0.77) in all three watersheds. The global nature of GRACE data allows this same methodology to be applied in other regional-scale studies, and could be particularly useful in regions with minimal data and in trans-boundary watersheds.