The sea surface elevation relative to the geoid, a dynamic boundary condition for the three-dimensional oceanic pressure field, is being determined over the global ocean every 10 days by a precision radar altimeter aboard the TOPEX/POSEIDON satellite. This is the most accurate altimeter data stream to date for the study of the ocean general circulation and its variability. The authors compare results from 2 years (October 1992–October 1994) of the satellite observations to computer simulations for the same period using a state-of-the-art ocean general circulation model driven by realistic winds from an atmospheric weather-prediction model. The average horizontal resolution of the model is 1/5° (varying from 30 km at the equator to 6 km at the polar latitudes), the highest for a global simulation performed to date. Comparisons of the mean circulation, the mesoscale variability, the amplitude, and phase of the annual cycle, as well as intraseasonal and interannual changes show that the simulations and observations agree fairly well over a broad range of temporal and spatial scales. However, the sea level variance produced by the model is generally less than the observation by a factor of 2, primarily in the eddy-rich regions. Comparison of wavenumber spectra indicates that even higher spatial resolution is needed to fully resolve the mesoscale eddies. The absolute dynamic topography determined from either the data or the model has an error on the order of 10 cm at wavelengths larger than 2000 km. Geoid errors are the limiting factor for the utility of the altimeter data at smaller scales. Heat flux forcing is a key factor in determining the simulated annual cycle of the ocean. Improved agreement with the observation is achieved when the model is driven by heat flux forcing instead of being nudged to sea surface temperature climatology. The temporal evolution of the intraseasonal fluctuations at mid- and high latitudes as well as the interannual variability of the tropical oceans, both are primarily wind driven, is simulated fairly well by the model.