The Bakhtegan catchment, an important agricultural region in south-western Iran, has suffered groundwater depletion in recent years. As groundwater is considered the main source of fresh water in the catchment, especially for agriculture, monitoring groundwater responses to irrigation is important. Gravity Recovery and Climate Experiment (GRACE) satellite data can help determine water mass changes in catchments and assess water volume changes. In this study, we compared GRACE-derived water mass data against groundwater volume variations measured in situ. We also assessed the efficiency of GRACE-derived data in catchments smaller than the 200,000 km2 recommended area when using GRACE. For the study period (January 2002 through December 2011), the GRACE data showed a 7.6 mm annual decline in groundwater level, with a total volume loss of 2.6 km3 during the period. The in situ monthly measurements of groundwater level showed an average depletion of 10 m in catchment aquifers during the study period. This depletion rate was supported by the recorded decrease in precipitation volume, especially in the post-drought period after 2007. These results demonstrate that GRACE can be useful tool for monitoring groundwater depletion in arid catchments.