The hydrologic cycle is a fundamental component of the climate system with critical societal and ecological relevance. Yet gaps persist in our understanding of water fluxes and their response to increased greenhouse gas forcing. The stable isotope ratios of oxygen and hydrogen in water provide a unique opportunity to evaluate hydrological processes and investigate their role in the variability of the climate system and its sensitivity to change. Water isotopes also form the basis of many paleoclimate proxies in a variety of archives, including ice cores, lake and marine sediments, corals, and speleothems. These records hold most of the available information about past hydrologic variability prior to instrumental observations. Water isotopes thus provide a ‘common currency’ that links paleoclimate archives to modern observations, allowing us to evaluate hydrologic processes and their effects on climate variability on a wide range of time and length scales. Building on previous literature summarizing advancements in water isotopic measurements and modeling and describe water isotopic applications for understanding hydrological processes, this topical review reflects on new insights about climate variability from isotopic studies. Our intention is to highlight new work and opportunities to enhance our understanding and predictive skill, rather than be exhaustive. We offer a set of recommendations to advance observational and model-based tools for climate research, and highlight opportunities to better constrain climate sensitivity and identify anthropogenically-driven hydrologic changes within the inherently noisy background of natural climate variability.