We examine low degree gravitational variations ΔC21, ΔS21, and ΔC20 observed by the Gravity Recovery and Climate Experiment (GRACE) satellites during the first 2 years of this gravity mission. The GRACE observations are compared with independent estimates from accurately measured Earth rotational changes and predictions from atmospheric, oceanic, and hydrological models. The 18 GRACE monthly gravity solutions, covering the period April 2002 to March 2004, show strong seasonal variability in the ΔC21, ΔS21, and ΔC20 time series, and generally agree with Earth rotation-derived changes and geophysical model estimates, in particular for ΔS21 and ΔC20. The reason for the poorer agreement between the GRACE results and the Earth rotation-derived estimates for ΔC21 is unclear. We demonstrate that the omission of the ocean pole tide in the GRACE data processing does have significant effects on the estimated ΔC21 and ΔS21.