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Extreme daily precipitation contributes to flooding that can cause significant economic damages, and so is important to properly capture in gridded meteorological datasets. This work examines precipitation extremes, the mean precipitation on wet days, and fraction of wet days in two widely used gridded datasets over the conterminous United States. Compared to the underlying station observations, the gridded data show a 27% reduction in annual 1-day maximum precipitation, 25% increase in wet day fraction, 1.5–2.5 day increase in mean wet spell length, 30% low bias in 20-yr return values of daily precipitation, and 25% decrease in mean precipitation on wet days. It is shown these changes arise primarily from the time adjustment applied to put the precipitation gauge observations into a uniform time frame, with the gridding process playing a lesser role. A new daily precipitation dataset is developed that omits the time adjustment (as well as extending the gridded data by 7 years) and is shown to perform significantly better in reproducing extreme precipitation metrics. When the new dataset is used to force a land surface model, annually averaged 1-day maximum runoff increases 38% compared to the original data, annual mean runoff increases 17%, evapotranspiration drops 2.3%, and fewer wet days leads to a 3.3% increase in estimated solar insolation. These changes are large enough to affect portrayals of flood risk and water balance components important for ecological and climate change applications across the CONUS. [ABSTRACT FROM AUTHOR]