Lake Turkana is one of the largest desert lakes in the world and is characterized by high degrees of inter- and intra-annual fluctuations. The hydrology and water balance of this lake have not been well understood due to its remote location and unavailability of reliable ground truth datasets. Managing surface water resources is a great challenge in areas where in-situ data are either limited or unavailable. In this study, multi-source satellite-driven data such as satellite-based rainfall estimates, modelled runoff, evapotranspiration, and a digital elevation dataset were used to model Lake Turkana water levels from 1998 to 2009. Due to the unavailability of reliable lake level data, an approach is presented to calibrate and validate the water balance model of Lake Turkana using a composite lake level product of TOPEX/Poseidon, Jason-1, and ENVISAT satellite altimetry data. Model validation results showed that the satellite-driven water balance model can satisfactorily capture the patterns and seasonal variations of the Lake Turkana water level fluctuations with a Pearson's correlation coefficient of 0.90 and a Nash-Sutcliffe Coefficient of Efficiency (NSCE) of 0.80 during the validation period (2004–2009). Model error estimates were within 10% of the natural variability of the lake. Our analysis indicated that fluctuations in Lake Turkana water levels are mainly driven by lake inflows and over-the-lake evaporation. Over-the-lake rainfall contributes only up to 30% of lake evaporative demand. During the modelling time period, Lake Turkana showed seasonal variations of 1–2 m. The lake level fluctuated in the range up to 4 m between the years 1998–2009. This study demonstrated the usefulness of satellite altimetry data to calibrate and validate the satellite-driven hydrological model for Lake Turkana without using any in-situ data. Furthermore, for Lake Turkana, we identified and outlined opportunities and challenges of using a calibrated satellite-driven water balance model for (i) quantitative assessment of the impact of basin developmental activities on lake levels and for (ii) forecasting lake level changes and their impact on fisheries. From this study, we suggest that globally available satellite altimetry data provide a unique opportunity for calibration and validation of hydrologic models in ungauged basins.