High-degree and high-order spherical harmonics of time-variable gravity fields observed by the Gravity Recovery and Climate Experiment (GRACE) gravity mission are dominated by noise. We develop two smoothing methods that suppress these high-degree and high-order errors with results superior to more commonly used Gaussian smoothing. These optimized smoothing methods considerably improve signal-to-noise levels of GRACE terrestrial water storage estimates relative to residual signal and noise over the oceans and show significantly better spatial resolution and lower leakage error. On the basis of analysis using an advanced land surface model, the equivalent spatial resolution from these optimized smoothing estimates is about 500 km, compared to the roughly 800--1000 km Gaussian smoothing that is required to suppress high-degree noise in the GRACE fields.