Vegetation affects the climate by modifying the energy, momentum, and hydrologic balance of the land surface. Soil-vegetation-atmosphere transfer (SVAT) schemes explicitly consider the role of vegetation in affecting water and energy balance by taking into account its physiological properties, in particular, leaf area index (LAI) and stomatal conductance. These two physiological properties are also the basis of evapotranspiration parameterizations in physically based hydrological models. However, most current SVAT schemes and hydrological models do not parameterize vegetation as a dynamic component. The seasonal evolution of LAI is prescribed, and monthly LAI values are kept constant year after year. The effect of CO2 on the structure and physiological properties of vegetation is also neglected, which is likely to be important in transient climate simulations with increasing CO2 concentration and for hydrological models that are used to study climate change impact. The net carbon uptake by vegetation, which is the difference between photosynthesis and respiration, is allocated to leaves, stems, and roots. Carbon allocation to leaves determines their biomass and LAI. The timing of bud burst, leaf senescence, and leaf abscission (i.e., the phenology) determines the length of the growing season. Together, photosynthesis, respiration, allocation, and phenology, which are all strongly dependent on environmental conditions, make vegetation a dynamic component. This paper (1) familiarizes the reader with the basic physical processes associated with the functioning of the terrestrial biosphere using simple nonbiogeochemical terminology, (2) summarizes the range of parameterizations used to model these processes in the current generation of process-based vegetation and plant growth models and discusses their suitability for inclusion in SVAT schemes and hydrological models, and (3) illustrates the manner in which the coupling of vegetation models and SVAT schemes/hydrological models may be accomplished.