It is often claimed that we do not understand the forces driving the global diversity gradient. However, an extensive literature suggests that contemporary climate constrains terrestrial taxonomic richness over broad geographic extents. Here, we review the empirical literature to examine the nature and form of the relationship between climate and richness. Our goals were to document the support for the climatically based energy hypothesis, and within the constraints imposed by correlative analyses, to evaluate two versions of the hypothesis: the productivity and ambient energy hypotheses. Focusing on studies extending over 800 km, we found that measures of energy, water, or water–energy balance explain spatial variation in richness better than other climatic and non-climatic variables in 82 of 85 cases. Even when considered individually and in isolation, water/energy variables explain on average over 60% of the variation in the richness of a wide range of plant and animal groups. Further, water variables usually represent the strongest predictors in the tropics, subtropics, and warm temperate zones, whereas energy variables (for animals) or water–energy variables (for plants) dominate in high latitudes. We conclude that the interaction between water and energy, either directly or indirectly (via plant productivity), provides a strong explanation for globally extensive plant and animal diversity gradients, but for animals there also is a latitudinal shift in the relative importance of ambient energy vs. water moving from the poles to the equator. Although contemporary climate is not the only factor influencing species richness and may not explain the diversity pattern for all taxonomic groups, it is clear that understanding water–energy dynamics is critical to future biodiversity research. Analyses that do not include water–energy variables are missing a key component for explaining broad-scale patterns of diversity.