Water retention and evaporation in the forest litter and deadwood play a critical role in forested Alpine catchments. Although overall storage capacities are small, i.e., in the order of few millimetres, litter layers retain and cycle significant amounts of annual precipitation, influence the subcanopy microclimate, forest evaporation dynamics and soil water recharge, because ultimately every rain drop needs to pass the litter layer to become available for soil water recharge. However, yet few studies investigated this important component of Alpine water budgets, thus key uncertainties regarding the spatial variability of storage capacities under different climatic conditions remain uncovered. Our study expands the limited previous research findings by conducting numerous additional field and laboratory experiments for > 400 plots sampled in different forests settings across the elevation gradient of the European Alps. We i) assess the overall storage capacities of litter layers ii) report storage timescales in different litter layer magnitudes estimated from field and climate chamber analyses and iii) reevaluate the role of litter layers shaping Alpine water budgets. Our results show that litter layers intercept roughly 2 to 6 mm of incoming precipitation thereby significantly limiting soil water recharge, especially during low intensity rainfalls. Climate chamber experiments allowed to assess the storage dynamics in litter layers under controlled temperature and humidity conditions yielding retention timescales of multiple days to > 1 week under typical Alpine climate conditions. Upscaling these findings to the water budgets of Alpine headwater catchments integrating existing meteorological data and catchment-scale modelling revealed that overall, 10 to 20% of annual precipitation are retained and evaporated from litter layers, thereby significantly affecting soil water recharge and streamflow generation. Sensitivity analyses indicate that shifting precipitation seasonality and increasing temperatures in future climates will further increase the importance of water retention and evaporation in litter layers. Together our results provide novel mechanistic insights into the contribution of litter layers to Alpine water budgets in current and future climates.