In this study, we implement a mosaic-type parameterization that represents the effects sub-grid scale topography and landuse on surface climate and hydrology within the framework of a regional climate model. The parameterization adopts a regular fine scale surface sub-grid for each coarse model grid cell. Meteorological variables are disaggregated from the coarse to the fine grid according to physical relationships. The land surface computations are then performed separately for each sub-grid cell. Finally, the surface fluxes are reaggregated to the coarse grid for input into the atmospheric model. In addition, the primary sub-grid scale effects having an influence on the formation of clouds and precipitation (both convective and resolvable) are represented. The parameterization is tested by performing a series of multiseasonal simulations over the European region. The results of the simulations show that the sub-grid scheme generally produces a more realistic representation of precipitation, surface temperature, and other related hydrologic fields (particularly over mountainous regions) than the scheme not including the sub-grid effects. This suggests an improved simulation of the water and energy budgets, including both the mean conditions and the variability at daily to interannual time scales. Overall, our mosaic-type approach can provide an effective tool to bridge the scaling gap between climate models and surface hydrological processes, both in regional and global climate models.