A model of water balance for a coniferous forest canopy which combines the Penman-Monteith equation to estimate transpiration from the dry canopy, E(t), and the Rutter model of interception to estimate evaporation from the canopy and stems wetted by rainfall, E(i), are described. Evaporation from the understorey and forest floor, E(u), estimated from the available energy determined from radiation attenuation by the tree canopy, is also included. The model is applied to an 11-year-old Pinus radiata D. Don stand before and after thinning. Parameters in the model were determined for the unthinned stand, and changes in the parameters following thinning were estimated from changes in tree number per unit area and leaf area index, L. Independent measurements of E(t) from trees growing in weighing lysimeters within the stand, estimates of evaporation from the canopy (not including the stems), E(ic), from measurements of rainfall, throughfall and stemflow, and measurements of E(u) are used to validate the model. The model also shows good agreement with measurements of the duration of tree canopy wetness and E(t) from a drying canopy after rainfall. The model is used to estimate the annual components of canopy water balance for the unthinned and thinned stands during a year with high, well distributed rainfall (1623 mm), when there was no summer drought period. For the unthinned stand, modelled annual E(t), E(i) and E(u) were 636, 268 and 93 mm, respectively, with the net amount of water added to the soil storage, N, being 626 mm. Thinning resulted in a significant reduction (36%) in modelled annual E(t), slightly less than the decrease in L (42%). The decrease in modelled annual E(i) (27%) was much smaller than the decrease in L. These results are discussed in relation to the significance of canopy structure in determining evaporative losses from forest canopies and the net addition of water to storage in the soil. During the year following thinning, the model indicated an increase in N of 201 mm (13% of gross rainfall). Implications for managing the water yield from forest catchments are discussed.