Arid and semi-arid regions of the world are particularly vulnerable to greenhouse gas–driven hydroclimate change. Climate models are our primary tool for projecting the future hydroclimate that society in these regions must adapt to, but here, we present a concerning discrepancy between observed and model-based historical hydroclimate trends. Over the arid/semi-arid regions of the world, the predominant signal in all model simulations is an increase in atmospheric water vapor, on average, over the last four decades, in association with the increased water vapor–holding capacity of a warmer atmosphere. In observations, this increase in atmospheric water vapor has not happened, suggesting that the availability of moisture to satisfy the increased atmospheric demand is lower in reality than in models in arid/semi-arid regions. This discrepancy is most clear in locations that are arid/semi-arid year round, but it is also apparent in more humid regions during the most arid months of the year. It indicates a major gap in our understanding and modeling capabilities which could have severe implications for hydroclimate projections, including fire hazard, moving forward.