A method is presented to address model state uncertainty in hydrologic model simulation. This is achieved by introducing tuneable parameters that allow adjustments to the model states. Excessive dimensionality is avoided by introducing only a limited number of parameters that control the index (timing) and size of the state adjustments. The method is designed to compensate for issues with hydrologic model structures, particularly those relevant to the soil moisture state in a rainfall-runoff model. In the context of water resource planning and management, errors in the model states have often been overlooked as an important source of uncertainty and have the potential to significantly degrade model simulations. A synthetic study shows that a classical parameter estimation approach will produce biased distributions when state errors exist, and that the proposed state and parameter uncertainty estimation (SPUE) can remove the bias in parameter estimates for improved model simulations. In a real case study, SPUE and the classical approach are implemented in 46 sites around Australia. The results show that hydrologic parameter distributions for a selected conceptual model can be significantly different when accounting for state uncertainty. This has large implications for scenario modelling since it puts into dispute how to determine appropriate parameters for such studies. SPUE parameters outperform the classical approach in a range of metrics including the Akaike Information Criterion. Additionally, SPUE parameters performed better during validation periods. Future work involves testing SPUE with different hydrologic model and likelihood formulations, and enhancing rigor by explicitly accounting for observational data uncertainty.