Satellite and reanalysis precipitation products are potential alternatives in hydrological studies, and it is very important to evaluate their accuracy and potential use for reliable simulations. In this study, three precipitation products (Tropical Rainfall Measuring Mission 3B43 Version 7 (TRMM 3B43), spatial interpolation grid data based on 2472 national meteorological observation stations in China (GRID_0.5), and National Centers for Environmental Prediction-Climate Forecast System Reanalysis (NCEP-CFSR)) were evaluated against gauge observations in the Xiangxi River watershed of Hubei Province. The performance results indicated that the results of the three precipitation products were correlated with those of the rain gauges; however, there were differences among the three products. TRMM 3B43 tended to overestimate precipitation with the highest correlation coefficient, while NCEP-CFSR tended to underestimate precipitation with the least satisfactory performance, and the performance of GRID_0.5 ranked between them. However, the annual and monthly mean errors differed, as the errors of most of the results driven by NCEP-CFSR were lowest. The errors varied at different time scales. During years with high precipitation, the results were often underestimated, while the results are often overestimated during years with low precipitation. According to the average monthly results, the GRID_0.5 results were closest to the gauge observations for most months. During the wet season, TRMM 3B43 performed better, while NCEP-CFSR precipitation performed better during the dry season. The errors from precipitation to streamflow, NPS pollution, and water environmental capacity (WEC) driven by the three precipitation products increased gradually, ranging from 10% for precipitation to over 20% for NPS pollution and almost 100% for WEC. The error increase for NCEP-CFSR was lower than that of the other two products. Although the simulation error from precipitation to the WEC results driven by the three precipitation products gradually increased, the degree of overestimation and underestimation became smaller.