Local dry/wet conditions are of great concern in regional water resource and floods/droughts disaster risk management. Satellite-based precipitation products have greatly improved their accuracy and applicability and are expected to offer an alternative to ground rain gauges data. This paper investigated the capability of Tropical Rainfall Measuring Mission (TRMM) rainfall data for monitoring the temporal and spatial variation of dry/wet conditions in Poyang Lake basin during 1998–2010, and validated its reliability with rain gauges data from 14 national meteorological stations in the basin. The results show that: (1) the daily TRMM rainfall data does not describe the occurrence and contribution rates of precipitation accurately, but monthly TRMM data have a good linear relationship with rain gauges rainfall data; (2) both the Z
index and Standardized Precipitation Index (SPI) based on monthly TRMM rainfall data oscillate around zero and show a consistent interannual variability as compared with rain gauges data; (3) the spatial pattern of moisture status, either in dry months or wet months, based on both the Z
index and SPI using TRMM data, agree with the observed rainfall. In conclusion, the monthly TRMM rainfall data can be used for monitoring the variation and spatial distribution of dry/wet conditions in Poyang Lake basin.