Accurate terrestrial water storage (TWS) estimation is important to evaluate the situation of the water resources over the Yangtze River Basin (YRB). This study exploits the TWS observation from the new temporal gravity field model, HUST-Grace2016 (Huazhong University of Science and Technology), which is developed by a new low-frequency noise processing strategy. A novel GRACE (Gravity Recovery and Climate Experiment) post-processing approach is proposed to enhance the quality of the TWS estimate, and the improved TWS is used to characterize the drought and flood events over the YRB. The HUST-Grace2016-derived TWS presents good agreement with the CSR (Center for Space Research) mascon solution as well as the PCR-GLOBWB (PCRaster Global Water Balance) hydrological model. Particularly, our solution provides remarkable performance in identifying the extreme climate events e.g., flood and drought over the YRB and its sub-basins. The comparison between GRACE-derived TWS variations and the MODIS-derived (Moderate Resolution Imaging Spectroradiometer) inundated area variations is then conducted. The analysis demonstrates that the terrestrial reflectance data can provide an alternative way of cross-comparing and validating TWS information in Poyang Lake and Dongting Lake, with a correlation coefficient of 0.77 and 0.70, respectively. In contrast, the correlation is only 0.10 for Tai Lake, indicating the limitation of cross-comparison between MODIS and GRACE data. In addition, for the first time, the NCEP/NCAR (National Centers for Environmental Prediction/National Center for Atmospheric Research) vertical velocity data is incorporated with GRACE TWS in the exploration of the climate-induced hydrological activities. The good agreement between non-seasonal NCEP/NCAR vertical velocities and non-seasonal GRACE TWSs is found in flood years