Rain-gauge networks are often used to provide estimates of area average rainfall or point rainfalls at ungauged locations. The level of accuracy a network can achieve depends on the total number and locations of gauges in the network. A geostatistical approach for evaluation and augmentation of an existing rain-gauge network is proposed in this study. Through variogram analysis, hourly rainfalls are shown to have higher spatial variability than annual rainfalls, with hourly Mei-Yu rainfalls having the highest spatial variability. A criterion using ordinary kriging variance is proposed to assess the accuracy of rainfall estimation using the acceptance probability defined as the probability that estimation error falls within a desired range. Based on the criterion, the percentage of the total area with acceptable accuracy A, under certain network configuration can be calculated. A sequential algorithm is also proposed to prioritize rain-gauges of the existing network, identify the base network, and relocate non-base gauges. Percentage of the total area with acceptable accuracy is mostly contributed by the base network. In contrast, non-base gauges provide little contribution to A(p) and are subject to removal or relocation. Using a case study in northern Taiwan, the proposed approach demonstrates that the identified base network which comprises of approximately two-thirds of the total rain-gauges can achieve almost the same level of performance (expressed in terms of percentage of the total area with acceptable accuracy) as the complete network for hourly Mei-Yu rainfall estimation. The percentage of area with acceptable accuracy can be raised from 56% to 88% using an augmented network. A threshold value for the percentage of area with acceptable accuracy is also recommended to help determine the number of non-base gauges which need to be relocated. Copyright (c) 2007 John Wiley & Sons, Ltd.