Water erosion removes soil nutrients, soil carbon, and in extreme cases can remove topsoil altogether. Previous studies have quantified crop yield losses from water erosion using a range of methods, applied mostly to single plots or fields, and cannot be systematically compared. This study assesses the worldwide impact of water erosion on maize and wheat production using a global gridded modeling approach for the first time. The EPIC crop model is used to simulate the global impact of water erosion on maize and wheat yields, from 1980 to 2010, for a range of field management strategies. Maize and wheat yields were reduced by a median of 3% annually in grid cells affected by water erosion, which represent approximately half of global maize and wheat cultivation areas. Water erosion reduces the annual global production of maize and wheat by 8.9 million tonnes and 5.6 million tonnes, with a value of $3.3bn globally. Nitrogen fertilizer necessary to reduce losses is valued at $0.9bn. As cropland most affected by water erosion is outside major maize and wheat production regions, the production losses account for less than 1% of the annual global production by volume. Countries with heavy rainfall, hilly agricultural regions and low fertilizer use are most vulnerable to water erosion. These characteristics are most common in South and Southeast Asia, sub-Saharan Africa and South and Central America. Notable uncertainties remain around large-scale water erosion estimates that will need to be addressed by better integration of models and observations. Yet, an integrated bio-physical modeling framework – considering plant growth, soil processes and input requirements – as presented herein can provide a link between robust water erosion estimates, economics and policy-making so far lacking in global agricultural assessments.