Quantitative approaches to assess the complexity of groundwater drought are hindered by the lack of direct observations of groundwater over space and time. Here, we present an approach to evaluate groundwater drought occurrence based on observations from NASA’s Gravity Recovery and Climate Experiment (GRACE) satellite mission. Normalized GRACE-derived groundwater storage deviations are shown to quantify groundwater storage deficits during the GRACE record, which we define as the GRACE Groundwater Drought Index (GGDI). As a case study, GGDI is applied over the Central Valley of California, a regional aquifer undergoing intensive human activities and subject to significant drought periods during the GRACE record. Relations between GGDI and other hydrological drought indices highlight our ability to capture drought delays unique to groundwater drought. Further, GGDI captures characteristics of groundwater drought that occur as a result of complex human activities and natural changes, thus presenting a framework to assess multi-driver groundwater drought characteristics.