We hypothesize that a necessary equilibrium exists between climate, soil water-holding capacity and maximum leaf area in water limited coniferous forest ecosystems. To test this hypothesis over a large range of forests in Montana, spectral reflectance data from two different satellite sensors, Landsat/Thematic Mapper and NOAA/AVHRR, were combined with leaf area index (LAI) measured or simulated from a forest ecosystem model, FOREST-BGC. Transpiration simulated by the model with representative climatic and soil data was used to calculate equilibrium leaf area index of 20 mature conifer forest stands across Montana. A strong correlation was found between calculated and field measured of leaf area index, R2 = 0.87. To test if satellite data can estimate LAI, measured leaf area index was correlated with spectral reflectance data from TM computed as the Normalized Difference Vegetation Index (NDVI) for 17 stands (R2 = 0.58). Then, LAI for 53 conifer stands across Montana was estimated using our equilibrium concept and related to AVHRR/NDVI at 1.1 km scale (R2 = 0.88). Species composition was found to be important only at the TM pixel scale of 30 m. AVHRR/NDVI provided an initial validation of our hydrologic equilibrium theory at regional scales. A quantitative relationship between climate defined simply as precipitation/potential evaporation, soil water-holding capacity and leaf area was developed using the model simulations. This relationship allows the prediction of either equilibrium leaf area index or soil water-holding capacity if the other is known.