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Existing drought indices have been widely used to monitor meteorological drought and agricultural drought; however, few of them are focus on drought monitoring for grassland regions. This study presented a new drought index, the Grassland Drought Index (GDI), for monitoring drought conditions in global grassland regions. These regions are vital for the environment and human society but susceptible to drought. The GDI was constructed based on three measures of water content: precipitation, soil moisture (SM), and canopy water content (CWC). The precipitation information was extracted from the available precipitation datasets, and SM was estimated by downscaling exiting soil moisture data to a 1 km resolution, and CWC was retrieved based on the PROSAIL (PROSPECT + SAIL) model. Each variable was scaled from 0 to 1 for each pixel based on absolute minimum and maximum values over time, and these scaled variables were combined with the selected weights to construct the GDI. According to validation at the regional scale, the GDI was correlated with the Standardized Precipitation Index (SPI) to some extent, and captured most of the drought area identified by the United States Drought Monitor (USDM) maps. In addition, the global GDI product at a 1 km spatial resolution substantially agreed with the global Standardized Precipitation Evapotranspiration Index (SPEI) product throughout the period 2005–2010, and it provided detailed and accurate information about the location and the duration of drought based on the evaluation using the known drought events.