Understanding freshwater fluxes at continental scales will help us better predict hydrologic response and manage our terrestrial water resources. The partitioning of evapotranspiration into bare soil evaporation and plant transpiration remains a key uncertainty in the terrestrial water balance. We used integrated hydrologic simulations that couple vegetation and land-energy processes with surface and subsurface hydrology to study transpiration partitioning at the continental scale. Both latent heat flux and partitioning are connected to water table depth, and including lateral groundwater flow in the model increases transpiration partitioning from 47 +/- 13 to 62 +/- 12%. This suggests that lateral groundwater flow, which is generally simplified or excluded in Earth system models, may provide a missing link for reconciling observations and global models of terrestrial water fluxes.