According to world metrological organization, African countries with a complex topography, are suffering from a shortage of metrological information. Hence, recently satellite-based rainfall products have been playing an important role and used as alternative sources of rainfall estimation. This study evaluates the performance of four high resolution satellite rainfall products (CHIRPS 2, PERSIANN- CDR, TAMSAT 2.0 and TAMSAT3.0) with the ground observed rainfall data over the Abay Basin, all satellite rainfall products which have different spatial resolution have been converted into similar spatial resolution and point to pixel approach over the period of 2000-2014. Continuous and categorical statistical parameters were used to compare with the observed rainfall at each station. Additionally, their applicability in the hydrology of stream flow were performed by using HBV- Light hydrological model for the Gumara watershed, where the model is calibrated by the stream flow data (observed variable) by using Kling-Gupta efficiency (KGE) as the objective function to evaluate the model performance. For the daily time series statistical comparison, 5479 data records were used and a good agreement were observed at Wegel-Tana station with TAMSAT 3, TAMSAT 2, PERSIANN-CDR and CHIRPS and correlation coefficients (r) of (0.6511, 0.620, 0.566 and 0.505 ) respectively. TAMSAT 2 showed a better correlation coefficient than its latest version in Amba-mariam and Mankush (r = 0.6514 and r = 0.4923) respectively, and mean daily comparison shows a better correlation. Lastly, the mean monthly comparison was done by converting the daily data in to 12 mean monthly data series and the good agreement were observed at Wereilu and Wegel-Tana station (r = 0.999 and r = 0.998) by CHIRPS respectively, which is better than monthly comparison results, and the lower agreement was (r = 0.851) observed by TAMSAT 2 at Alem-Ketema. The study indicates that, satellite rainfall estimates accuracy increases when the time step of comparison increases. The HBV-Light model was used to simulate the daily flow using the datasets (2000-2006), to optimize model parameters and shows a good performance when calibrated and validated with a KGE of 0.679 and 0.8274 respectively, CHIRPS and TAMSAT 3 shows relatively better performance but, the model still performs weakly. Bias-adjusted satellite rainfall estimates showed acceptable model performance, Cor.TAMSAT 3 and Cor.TAMSAT 2 were the better performed products showing an objective function result (KGE) and correlation coefficient (r) of (0.638,0.778 for calibration and 0.433, 0.498 for validation period) and (0.630,0.849 for calibration and 0.418,0.560 for validation period) respectively. This study indicates that, satellite rainfall estimates should be adjusted before using for any application, and should be validated or checked for the specific study area before selecting for any application.