Direct-runoff and baseflow are the two primary components of total streamflow and their accurate estimation is indispensable for a variety of hydrologic applications. While direct runoff is the quick response stemming from surface and shallow subsurface flow paths, and is often associated with floods, baseflow represents the groundwater contribution to streams and is crucial for environmental flow regulations, groundwater recharge, and water supply, among others. L’vovich (1979) proposed a two-step water balance where precipitation is divided into direct runoff and catchment wetting followed by the disaggregation of the latter into baseflow and evapotranspiration. Although arguably a better approach than the traditional Budyko framework, the physical controls of direct runoff and baseflow are still not fully understood. Here, we investigate the role of the aridity index (ratio between mean annual potential evapotranspiration and precipitation) in controlling the long-term (mean-annual) fluxes of direct runoff and baseflow. We present an analytical solution beginning with similar assumptions as proposed by Budyko (1974), leading to two complementary expressions for the two fluxes. The aridity index explained 83% and 91% of variability in direct runoff and baseflow from 499 catchments within the continental US, and our formulations were able to reproduce the patterns of water balance proposed by L’vovich (1979) at the mean annual timescale. Our approach allows for the prediction of baseflow and direct runoff at ungauged basins and can be used to further understand how climate and landscape controls the terrestrial water balance at mean annual timescales.